Business uncertainty has ‘risen markedly’ since Brexit vote

Firms are trying to maintain 'business as usual' said BoE regional agents
Firms are trying to maintain 'business as usual' said BoE regional agents

The Bank of England said business uncertainty had “risen markedly” since the Brexit vote - but there was “no clear evidence” of a sharp economic slowdown.

The Bank’s regional agents, which are in regular contact with companies across the UK, said firms were trying to maintain “business as usual” after many failed to draw up plans for a British exit from the European Union.

It added that a third of contacts predicted employment and investment would come under pressure within the year, but expected little impact in the short term.

The update comes after the Bank held back from cutting interest rates from 0.5% this month, where they have remained since March 2009 - but signalled a rate cut could come in August.

Investors and economists were taken by surprise, having expected the Bank to cut rates to 0.25% after governor Mark Carney said in June that action would be taken over the summer.

In its agents’ summary, the Bank said: “Following the EU referendum, business uncertainty had risen markedly.

“Many firms had only just begun to formulate new business strategies in response to the vote and, for the time being, were seeking to maintain ‘business as usual’.”

It added: “As yet, there was no clear evidence of a sharp general slowing in activity.”

The Bank said its agents had “increased the intensity of their intelligence gathering” since Britain voted to leave the EU, and for many businesses the referendum result had come as a shock.

It also pointed to signs of economic disruption following Britain’s vote to leave the EU, with some reports of “planned foreign direct inward investment being postponed”.

It said some international firms also expect their European operations to receive a greater share of future investment than those in the UK.

But while the lion’s share of the companies did not expect capital spending to be hit in the short term, the Bank found that some planned mergers and acquisitions had been put on ice or cancelled - and housebuilding firms were becoming “cautious in their approach” to buying land.

The report follows a gloomy forecast for the UK economy from the International Monetary Fund, which sharply downgraded its forecast for Britain following its decision to leave the EU.