Businesses still smiling following Brexit vote, except for those in manufacturing
Businesses remained relatively upbeat following June's Brexit vote, as figures out today show companies' confidence dipped less than expected.
BDO's business output index for July, which measures expected orders for the three months ahead, has slipped from 99 to 98.2, while its business optimism index, which measures confidence about the six months ahead, fell from 98.9 to 97.9. The accountancy firm pointed out that these dips were much less drastic than had been predicted.
"Brexit has compounded the continuing slowdown of the UK economy but there is opportunity as well as challenge ahead for UK businesses," said Peter Hemington, partner at BDO. "The Bank of England's decision to lower interest rates is a step in the right direction.
"We now need a concerted effort from government to lay the foundations for future growth. That means taking advantage of cheap borrowing costs to invest in UK infrastructure, encouraging prosperity across the regions and improving productivity."
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However, matters were much more gloomy for manufacturers. BDO's optimism index for this sector has fallen to a four-year low at 81, which is below the 95 mark which signals a contraction.
Meanwhile, separate figures, also released today, from EEF reveal many manufactures are reluctant to borrow from banks. More than half (55 per cent) are now hoarding more cash on their balance sheets compared with pre-recession levels and a similar proportion (53 per cent) would push back or call off investment plans if they couldn't self-finance them.
"Manufacturers' reluctance to rely on external finance is a persistent hangover from the credit crunch, where trust and confidence in the banks stalled and never quite recovered," warned Lee Hopley, chief economist at EEF. "But with the Brexit vote dampening investment intentions and adding to uncertainty, this pre-existing condition could now become further aggravated, posing a risk for growth."