A new survey has revealed a dramatic decline in business confidence in the UK following the vote to leave the European Union.
The YouGov/Cebr Business Confidence Index stood at 112.6 just before the referendum, but has since fallen to 105.0 as businesses reflect on the possible consequences of the decision.
The Centre for Economics and Business Research (Cebr) noted, however, that the negative outlook among UK businesses may be a ?knee jerk? reaction to the Brexit vote rather than an attitude that will persist in the long term.
Businesses were questioned between 28 June and 1 July, with the results compared against a similar survey taken on 21-23 June.
This showed that the share of firms feeling pessimistic about the economic outlook over the next 12 months doubled from 25% to 49%. What?s more, gloominess about businesses? own outlooks increased by ten percentage points over the same period (moving from 16% before the referendum to 26% after it).
A closer look at how businesses feel about their own operations reveals that hopes for domestic sales, exports and capital investment have dropped sharply. The index tracking expectations for domestic sales fell by almost 14 points in a week, hopes for exports declined by 15 points and investment expectations dropped by almost eight points.
Commenting on the report, Cebr director Scott Corfe said: ?These figures show what is happening on the ground and they suggest a significant shock reaction. Not only are businesses feeling much more pessimistic in general about the state of the economy, but their own expectations for domestic sales, exports and investments over the next 12 months have gone off a cliff. Hopefully this is a short-term panic reaction and confidence will edge up again once the dust settles.?
A separate survey by the Federation of Small Businesses (FSB), taken before the referendum, provides further evidence that UK businesses are facing an uncertain future.
The FSB Small Business Index recorded small business confidence at a four-year low and found that smaller firms are planning to cut jobs for a second consecutive quarter. Meanwhile, just 12.2% of small firms are planning new capital investment in the next 12 months – less than half of the 31.9% planning the same a year ago – despite improvements in the availability and affordability of credit.
FSB national chairman Mike Cherry called on the Government to ease the cost of doing business.
?For the first time since 2009, the UK economy faces a real chance of a recession,? Cherry said. ?To head this off, we need to do everything we can to support small firms to grow, create jobs, and weather the harsh economic headwinds.?