Business pessimism 'doubles after Brexit vote'

A view of the City of London seen from Greenwich Image copyright Getty Images

UK business confidence has fallen sharply in the aftermath of the vote to leave the EU, research suggests.

The share of businesses that reported feeling pessimistic about the UK economy doubled in the week after the Brexit vote.

The figure jumped from 25% the week before the referendum to 49%, according to YouGov and the Centre for Economics and Business Research.

Falling confidence can lead companies to pull back on investment and hiring.

Scott Corfe, director at the CEBR, said that the figures indicated a "significant shock reaction" among UK businesses following the vote last month.

Mr Corfe told BBC Newsnight: "Businesses are clearly spooked by the referendum result and they've reined in their intentions for capital spending. They've reined in their expectations for exports and domestic sales growth.

"And business confidence is a leading indicator for where the economy is heading over the coming quarters. What it suggests is that the economy is in for quite a significant slowdown over the next three to six months."

The figures suggest that businesses have become more cautious in their outlook for sales and exports, as well as rethinking their investment plans.


Business expectations for UK sales, exports and investment all dropped, according to the research. The index for capital investment plans fell from 108 in the week before the vote to 100.1. A figure above 100 indicates growth, while below 100 suggests contraction.

Expectations for exports fell from 115.3 to 99.8, suggesting falling sales overseas. Businesses that sell internationally face particular challenges given the uncertainty over the future relationship between the UK and the EU, its largest trading partner.

The slump in business confidence comes after research last week showed a marked deterioration in consumer sentiment about the economy. YouGov/CEBR said that consumer confidence had fallen back to its lowest level since May 2013.

Economists are watching measures of consumer and business confidence to gauge how uncertainty around the referendum result might affect the real economy, and whether it could prompt households to delay large purchases or companies to shelve investment plans.

"We expect this uncertainty to generate an investment-led recession as recent falls in business investment intensify," economists from Goldman Sachs wrote last week. "While assuming quite a resilient consumer, we expect weakening business investment to tip the UK into recession around the turn of the year."

Helen Thomas is business editor for BBC Newsnight. You can watch her report on iPlayer - and follow her on Twitter here

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