Business confidence in the UK has ?collapsed? in the wake of the EU referendum, according to a survey by Credit Suisse.
The bank found that corporate sentiment in the UK has ?deteriorated out of all recognition? following the vote to leave the European Union, the Financial Times reported today.
For the first time since 2013, more firms are expecting to cut than raise spending. Two thirds of respondents told Credit Suisse that they are likely to postpone or reduce spending in the UK in the next six months.
The bank noted, however, that although Brexit is a factor in the responses, the UK readings did have negative momentum ?well before? the referendum.
That assertion is backed up by the latest quarterly economic survey by the British Chambers of Commerce (BCC), which suggests that UK economic growth was ?uninspiring? even before the uncertainty caused by the EU referendum result.
The services sector ? the UK?s main driver of economic growth ? saw domestic and overseas sales fall ahead of the vote, and manufacturing sales remained at a historically low ebb, the BCC reported. On the basis of its data, the business organisation does not expect official data to show an improvement in UK GDP for Q2.
Dr Adam Marshall, acting director general of the BCC, commented:
?Even before the EU referendum, both business confidence and economic growth were softening in many parts of the UK. Our latest survey results, captured just before the vote, suggest that many businesses have been operating in something of a holding pattern for some time.
?It is categorically too early to say what impact the referendum decision has had on most firms across the UK, as we have as yet had only anecdotal evidence from those facing challenges, those holding steady, and those seizing new opportunities. The impact of the referendum will require many businesses to take decisions whose impacts will take time to show up on the bottom line.
?Yet it is not too early for us to say what business wants to see: stability in markets, clarity in politics, and action on the issues that matter for growth. At a time of transition, all the businesses I speak to want Westminster to lead by example ? by making bold decisions to progress key infrastructure and construction projects, by guaranteeing that EU workers can stay in British firms, and by seeking the best possible future terms of trade for the UK. Business confidence would be buoyed by strong and clear leadership, both on the timeline for EU negotiations and on the big decisions unrelated to our future relationship with the EU.?
So what does the future hold? In the short term, bearing in mind the ongoing uncertainty and negative business sentiment, Credit Suisse predicts quantitative easing and a cut in interest rates. It expects the Bank of England to slash interest rates to just 0.05% on Thursday, from a current record low of 0.5%, the Telegraph reported.