Bank of England Agents’ survey finds six in 10 firms to cut investment plans due to EU vote
Investment and hiring will flat-line over the rest of the year as UK businesses come to terms with the result of the EU referendum, a Bank of England survey has revealed.
The Bank's agents' summary of business conditions, comprised from interviews with 270 firms representing 1.2m employees "indicated the result of the EU referendum would have a negative effect, overall, on capital spending, hiring and turnover over the coming year," this morning.
Half of all companies said they would scale back plans to recruit more staff over the next year. No firms said the result of the EU referendum would encourage them to invest more, while 60 per cent said they were now planning to spend less.
However, the survey results did not point to rising unemployment or lower investment in absolute terms. Instead, the Bank said: "Scores [were] pointing to expectations of little change in staff numbers and capital spending over the coming six to twelve months."
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"Most businesses were not making immediate changes to capital spending plans, but a significant minority were reviewing their risk appetite and some were deferring decisions," the Bank said.
The Bank also confirmed consumer spending was weaker in the period around the 23 June vote, but suggested the weather could be to blame for this. However, it noted signs of increased "consumer caution" and weaker demand for big-ticket items.
One in three companies also warned they expected to raise prices over the next six to 12 months because of the vote.
Purchasing mangers' index (PMI) surveys point to the fastest economic contraction since the recession
Business surveys have become increasingly important indicators of the state of the UK economy since the vote, since official data such as the Office for National Statistics' (ONS) measures of growth, employment and wages still refer to periods before the referendum.
The Bank of England unleashed a £170bn money-printing programme last week and cut interest rates to a new all-time low of 0.25 per cent in a bid to prop up the economy. It said if the official data showed a similar gloomy picture to survey results over the summer, it would cut rates to just above zero before the end of the year.