The UK economy was already showing signs of slowing ahead of the European referendum, according to the latest Business Trends Report by accountants and business advisers BDO LLP.
This month’s report reveals that the rising uncertainty ahead of Brexit dragged business output and business optimism to three-year lows for the second month running.
Business output – which reflects companies’ experience of orders for the three months ahead – now sits at 99.0, whereas business optimism – which predicts growth six months ahead – fell to 98.9. UK Manufacturing continues to have the gloomiest outlook, with its optimism sub-index slumping to 83.8.
Uncertainty surrounding Brexit also contributed to the continuing slowing rate of job creation. BDO’s Employment Index – which indicates firms’ intentions to hire – has now dropped to 101.4, and is currently at a two year low.
Commenting on the findings, David Eagle, Partner, BDO LLP, said:
“The uncertainty prompted by Brexit has disrupted investment in the UK economy, but the signs of a slowdown were already showing ahead of the decision.
“In all likelihood, whatever arrangements the UK eventually arrives at with the EU won’t look very different from what we have at the moment. So businesses cannot afford to get caught up in the hysteria. They need to hold their nerve and continue to invest in the UK.
“We are at a crucial moment where we must be sensible in protecting the UK economy. We need a plan of action now that gives businesses the added confidence to progress with investment plans.”
BDO’s three point Brexit plan
In order to reassure UK businesses, BDO proposes that government acts quickly to enact a three point plan to stabilise the economy and position us for growth. The plan includes:
· Encouraging prosperity in the manufacturing regions – take advantage of cheap borrowing costs to invest in business-friendly infrastructure in regions traditionally strong in manufacturing. Government plans to rebalance the UK economy must be greatly increased
· Solving the productivity puzzle – the growing workforce is not increasing productivity, real action needs to be taken to address the productivity puzzle by incentivising investment in training and skills
· Injecting more cash into the economy – use quantitative easing to lower borrowing costs further and encourage businesses to invest