Fears of Britain’s exit from the EU is introducing a worrying investment setback as companies and investors keep stalling on investment plans so as not to be caught up in the uncertainty that continues to loom over the economy since the referendum, studies have revealed.
Firms, manufacturers, and both domestic and international investors are either pulling back or pressing the pause button on already laid out investment plans. Some businesses are holding back on planning at all until the uncertainties blow over while others are preparing to protect their businesses.
The office of National Statistics have showed that the investments of UK firms saw a growth of only 0.5pc in 2017’s second quarter with official statements to show that that rate slowed even further to 0.3pc in the third quarter after the fall in investment in 2016.
Manufacturers are taking a more careful approach to the economic uncertainties
According to an annual survey conducted by the manufacturing organisation, EEF in conjunction with Santander, investment in new machinery and plant by manufacturers in the UK has witnessed a turnover rate reduction from 7.5pc in 2016 to 6.5pc in 2017. The survey also reports that only few companies have plans in place to increase the capacity of their production in the coming years.
The survey highlights the worries of the business community in the UK. The EEF survey has provided hard proof of Brexit’s effect on the economy. The investment slump comes against a backdrop of global economic boom and is a slack on the progress that started after 2014 when the UK’s investment started to move up.
The EEF’s chief economist, Lee Hoopley, states that “With high global demands, industry should make new investment in productivity-enhancing technology and capacity because conditions should be ripe, but Brexit means the outlook on the future concerning investment isn’t clearcut”
Business directors’ confidence slump
Another survey, this time of business directors, shows that bussineses are being forced to slam the brakes on investment moves due to the bleak economic outlook.
A poll of the members of the Institute of Directors, IoD, showed that an 18pc balance of directors feel negative about the prospects for the economy of the UK.
This depicts the third highest point of pessimism toward the economy in the past year despite the boost in confidence that came in the General Election in june.
Business bodies are looking for a way forward
With every survey echoing the concerns of one another, the UK business community has continued to call out to the government to take measures that can reverse the weak outlook on Britain’s economy.
The IoD has compelled chancellor Philip Hammond to take expanding business investment into consideration in the next budget. The Institute’s director general, Stephen Martin, urged the chancellor not to ignore the hesitant feeling of businesses about their decisions concerning investment despite the “difficult balancing act” he has to perform.
Not just the IoD, the head of the EEF, Lee Hoopley, also called on the chancellor to leverage his autumn budget in November in making sure that measures are put in place to encourage businesses to invest.
The UK’s federation of small businesses have also pleaded on the government to make good on their promise to improve road structures and the region’s broadband service in other to move investment further.
The bottom line
With the fears of Brexit hovering over the economy, the property market and construction industry not being left out, the inaction of companies towards investing can be justified since no one would want to be taken by the kind of surprise that hit the world in 2008.