Business confidence has dropped to a four-year low following Britain’s vote to leave the EU, with the outlook for demand, employment and investment weaker across all sectors of the economy.
The service sector saw the biggest fall, down by a sizeable 30 points across hospitality and leisure, retail and wholesale, business and other services.
The Lloyds’ Business in Britain report found more than a quarter of companies said the main threat to growth in the next six months was economic uncertainty and a further 18 per cent named the drop in demand as the biggest danger.
Nigel Driffield, a Professor of Strategy & International Business at Warwick Business School, said the important questions now concern what can be done to alleviate the problems that many sectors of the UK are facing.
“Clearly in the short term the government seems to be making little headway on the fundamental question concerning the nature of the Brexit deal, and specifically what it means for the free movement of both goods and services, as well as people.
“At the centre of business, concerns are not merely access to the single market in terms of selling to final customers, but equally important is the ability of firms to coordinate activities and supply chains across countries. The government can perhaps do more in the short term to reassure potential investors that here, irrespective of the Brexit deal that is eventually done, support through VAT rates, export credit, and potentially tax treatments of certain activities, such as R&D, will still encourage high tech investments in the UK.
“Equally, at a local level, Brexit potentially offers opportunities for regions of the UK to explore their own inward investment strategies based on local needs, and understanding of local labour markets. This requires more flexible approaches to attracting internationally mobile capital, including brokering deals between local firms and inward investors to build robust supply chains, but also more focused policies around sectors key to the region. This of course goes hand in hand with the previously promised devolution to city-regions and other areas of the UK, along with the much vaunted industrial policy.
“In short, the government needs to reassure internationally mobile capital, both foreign and domestic, that Britain is not just merely ‘open for business’ but that plans are in place to ensure that, whatever the outcome of Brexit, operations based in the UK will not be disadvantaged compared with those in Europe.”