UK firms are expecting to put hiring and expansion plans on hold as they brace for a trading hit following the Brexit vote, according to the Bank of England.
The Bank’s latest survey of firms revealed businesses across all sectors except manufacturing expect turnover to be knocked over the year ahead amid the fallout from the decision to quit the EU.
Its gloomy update comes as the Bank of England confirmed it would press on with its economic recovery plan announced last week despite hitting an early stumbling block.
The Bank faced a £52 million shortfall on Tuesday after it was unable to buy as many government bonds from City investors as it needed under its new quantitative easing (QE) push.
Policymakers announced another £60 billion of QE last week as part of an economy-boosting package as it cut rates for the first time in more than seven years, to 0.25% from 0.5%.
It was the first time the Bank had failed to buy enough so-called gilts to meet its target since first launching the QE programme in 2009 to steer the economy out of the financial crisis and subsequent recession.
The Bank said it would carry on with its gilt-buying programme as planned for the next three months, but would look to catch up on the shortfall from November.
While the Bank appeared unfazed by the setback, there are fears the gilt shortfall sends an early warning of the constraints it may face in finding enough sellers to meet its £60 billion target.
The need for action to jump-start the economy was laid bare in its latest survey of firms, which showed a slowdown in business services growth and consumer spending.
Business services and construction firms appeared the hardest hit, although manufacturers are expecting a fillip from the weaker pound, according to the report.
It signalled the drop in manufacturing exports had been halted by the fall in sterling, which is making British goods cheaper for overseas buyers.
The report - which polled around 270 firms in the month after the Brexit vote - showed consumer spending growth had slowed further, with demand for large items falling.
But recent wet weather was also thought to be partly to blame for the drop in consumer spending.
Housing market activity is also under pressure, although some of the weakness may also be down to the usual seasonal lull and recent lower demand from buy-to-let investors after April’s stamp duty hike, the report found.