The Bank of England is yet to see any clear evidence of an economic downturn due to Britain’s decision to vote in favour of leaving the European Union, although hiring and investments were being put on hold.
Business uncertainty has “risen markedly” in the four weeks following the EU referendum, but there was no evidence that consumers had reined in their spending, the BoE’s regional agents said on Wednesday (20 July).
“A majority of firms spoken with did not expect a near-term impact from the result on their investment or staff-hiring plans,” Britain’s central bank said in a statement.
“But around a third of contacts thought there would be some negative impact on those plans over the next 12 months. As yet, there was no clear evidence of a sharp general slowing in activity.”
The report echoes the sentiment of BoE’s chief economist Andy Haldane, who last week said UK firms only planned to “trim and singe” their hiring plans, rather than implementing a radical post-Brexit overhaul.
However, the BoE release did include a number of warnings. “There were a few reports of planned foreign direct inward investment being postponed,” it said.
“A number of companies were considering alternative European locations for aspects of their business, and some contacts within large international firms expected their continental European operations to receive a greater share of future investment than their UK ones.”
Data released on Wednesday, showed the UK unemployment rate fell to its lowest level in more than a decade in May, declining to 4.9%.
On Tuesday, the International Monetary Fund cut its growth forecast for Britain next year from 2.2% to 1.3%. Earlier this month the BoE warned the UK’s economy will, in all likelihood, slow down because of the Brexit vote after growing in line with expectations in the run-up to the 23 June referendum.
A survey released by accountancy firm Deloitte on Monday, showed the confidence levels of the chief financial officers of some of the largest companies in the UK have declined post the Brexit vote.
Some 73% of respondents were pessimistic about their financial prospects, compared with 32% in the previous quarter. The figure marked the highest level of pessimism since 2007, even exceeding readings that were recorded during the 2008 financial crisis.