UK business confidence more resilient to Brexit decision, finds BDO
Business confidence has not been as damaged by the Brexit decision as much as had been feared, a new study of UK data appeared to show on Monday.
Confidence among UK businesses fell to a three-year low, according to accountant BDO's business trends figures for July carried out by the Centre for Economics and Business Research (CEBR), but the decline is less than expected after analysts feared the vote to leave the EU would hit sentiment harder.
Business output, a measure of companies’ experience of orders for the three months ahead, now sits slightly lower on the previous month at 98.2, down from 99.0in June and 99.7 in May.
Business optimism, which is based on growth prospects six months out, slipped to 97.9 from 98.9 and 99.4 in the two months before.
BDO suggested this meant that the “initial impact of the Brexit vote has been less severe than expected", as the headline index readings lie roughly midway between the 95.0 mark on the indices – below which lies possible recessionary conditions - and 100.0 – which correlates to the UK’s trend growth rate of just over 2%.
"While there is a definite and continued decline in the confidence of UK business people, the latest drops are not yet as dramatic as may have been predicted."
The study emerges on the same day as a survey from Visa and Markit showing UK consumer spending picked up in July, with credit and debit card spending rising 1.6% year-on-year in July, which was the biggest rise in three months, and up from 0.9% in June.
However, the picture was much gloomier in the UK manufacturing industry, as BDO found optimism dropped to a four-year low, down to 81.0 – well below the 95 mark which indicates contraction.
"The falling value of sterling signals better exporting conditions and offers some hope for UK manufacturers, but rising inflation will also affect the sector by pushing up costs," BDO said, with its inflation index rising to 99.9 from 97.9 and set to rise further in the coming months following the drop in interest rates.
The business output and optimism indices are calculated by taking a weighted average of the results of the UK’s main business surveys, including the CBI industrial trends surveys, the Bank of England Agents’ summary of business conditions, and the Markit/CIPS Manufacturing and Services PMI data, and therefore cover over 4,000 different respondents from companies employing approximately 5m employees.