UPDATE 1-British economy losing steam as business investment wilts, surveys show
* British Chambers of Commerce survey shows economy
* Sales among services companies hit 4-year low
* Business investment weak, according to BCC and Deloitte
(Adds detail, graphics)
By Andy Bruce
LONDON, Oct 10 Britain’s economy appears to be
losing steam, with major business surveys showing a marked
slowdown in the services sector and boardrooms beset by doubt
about the future following the country’s vote to leave the
The surveys released on Monday will heighten concerns about
the longer-term prospects of the economy which has so far fared
better than most economists expected since June’s Brexit vote.
That initial resilience has been driven mostly by consumers
who largely took the referendum result in their stride, but the
signs of weak investment intentions in the surveys suggest
companies are much more nervous.
Business investment and turnover confidence hit four-year
lows, the British Chambers of Commerce (BCC) said in a quarterly
survey of 7,000 businesses, the largest of its kind.
Separately, chief financial officers in major British firms
reported only a partial rebound in business morale after a
post-Brexit vote nosedive, accountants Deloitte reported.
Both surveys were conducted before the government alarmed
employers and financial markets last week by outlining plans to
force businesses to list the proportion of foreign staff and
“flush out” firms not doing enough to hire British workers.
After fierce criticism from business groups, the government
denied it wanted to “name and shame” companies.
The confusion compounded worries among investors about the
degree of access British exporters will have to the EU. Fears
about a so-called “hard Brexit” without free access helped
pushed sterling to a fresh 31-year low against the dollar last
The BCC survey suggested the weak pound has boosted exports
for manufacturers. But it also pointed to a slowdown among
services firms that form the backbone of Britain’s economy.
“The slowdown in services is concerning because it obviously
is the dominant sector in the UK economy,” Adam Marshall, the
BCC’s acting director general, told Reuters.
Investors have become increasingly doubtful that the Bank of
England will cut interest rates again this year, given robust
consumer spending and sterling’s renewed plunge.
But policymakers will regard the BCC and Deloitte surveys as
consistent with their view that the economy will slow markedly.
The BCC said its latest survey, conducted between Aug. 22
and Sept. 12, supported its forecast that the economy will grow
by just 1 percent next year, half its recent average.
Manufacturers’ plans for spending on plant and machinery and
service sector investment in staff training fell to their lowest
levels since 2012 when the economy was close to recession.
“It makes it all the more important that the Autumn
Statement delivers positive steps to ‘crowd in’ business
investment and build business confidence,” Marshall said.
Finance minister Philip Hammond has pledged to help the
economy through the Brexit turbulence. He is due to set out his
budget policy on Nov. 23 in what is known as the Autumn
The Deloitte survey, conducted at 124 large firms from Sept.
12 to Sept. 26, showed the outlook for capital expenditure and
hiring improved in the third quarter from the previous finance
officers’ poll taken in the immediate aftermath of the Brexit
But the rebound was small.
“The animal spirits of the corporate sector took a battering
in the wake of the referendum and, three months on, Brexit
continues to loom large for the UK corporate sector,” Deloitte
chief economist Ian Stewart said.
Forty percent of respondents expected to cut investment over
the next three years, down from 58 percent just after the vote,
and 46 percent expected hiring to slow, down from 66 percent.
Rising inflation looks likely to be another challenge.
The BCC survey showed many more manufacturers now expected
to raise prices, reflecting a sharp increase in raw material
costs in part due to sterling’s weakness.
The British Retail Consortium said it was worried about
import prices if Britain lost its preferential access to EU food
markets and adopted World Trade Organization tariffs instead.
The average duty on meat imports could be as high as 27
percent, while clothing and footwear would attract tariffs
ranging from 11 to 16 percent, the BRC said.
(Editing by Editing by Jeremy Gaunt)