Business confidence slips back as 'hard Brexit' prospect raises alarm bells Business confidence slipped back last month as…
Sterling has plunged 18% against the US dollar and 11% against the euro since Britain voted to leave the EU
Business confidence slipped back last month as sterling’s collapse and the prospect of a “hard Brexit” raised alarm bells for corporate Britain.
The YouGov/Cebr UK economic index dropped three points to 109.1 in October, down from 112.4 in September.
The drop came as firms digested the likelihood of Britain exiting the single market and rising costs from higher inflation.
It said companies were also more gloomy about the outlook for the UK economy, with data showing optimism had dropped 11 percentage points to 33%, while pessimism clocked up 10 percentage points to 45%.
Scott Corfe, director at the Centre for Economics and Business Research (Cebr) said the pound’s sharp slump since the Brexit vote had been a mixed bag for UK businesses.
“On the upside, UK exports are more price competitive, and the YouGov/Cebr Business Confidence Index shows a solid picture for exports.
“On the downside, rising import costs are set to squeeze profit margins, and household finances are set to be squeezed by higher inflation.
“Overall, risks are on the downside and companies are more concerned than they were a month ago.”
Sterling has plunged around 18% against the US dollar and 11% versus the euro since Britain voted to leave the European Union.
The currency fall has already started to ramp up costs for manufacturers, with the Producer Prices Index (PPI) showing total input prices rising 12.2% in October, compared to a 7.3% rise in September, according to the Office for National Statistics.
Prime Minister Theresa May’s pledge to invoke Article 50 by the end of March 2017 has also been a cause of concern for business, sparking fears that the Government will opt for a “hard Brexit”, with Britain leaving the single market and operating under World Trade Organisation (WTO) rules.
Stephen Harmston, head of YouGov, added: “September’s relative optimism may have been the calm before the storm really started.
“The volatility in the currency markets and the talk of leaving the customs union and single market highlight that while leaving the EU is a political decision, the economics are ever present.
“Confidence is crucial but it remains to be seen whether October’s slight uptick in business pessimism is an initial reaction to proposals that will quickly be absorbed or a sign of things to come.”