EU vote uncertainty ‘casting a dark cloud over the economy’

BIG business warned last night that a ‘dark cloud of uncertainty’ ahead of the EU referendum was having a ‘chilling’ effect on investment.

The Confederation of British Industry cut its growth forecasts for the economy, saying firms were putting investment plans on hold because they were worried about the result of the vote.

The warnings are likely to be dismissed by the Leave side, who pointed out that the CBI supported adopting the euro – a decision that was wrong then, meaning they are probably wrong now. The business group’s latest quarterly forecast predicts that the UK will see per cent GDP growth in both 016 and 017, down from its previous estimate of .3 per cent and .1 per cent respectively. The CBI said growth is expected to be driven by household spending and investment, but the deterioration in the Brexit vote and the global economic outlook represent ‘major challenges’.

It said Brexit uncertainty is having a ‘tangible impact’ on the spending plans of some firms. The warning comes after Bank of England governor Mark Carney said a Brexit vote could trigger a possible ‘technical recession’ and see the pound plunge in value. Last week the International Monetary Fund also warned of the ‘risks’ of Brexit.

CBI director general Carolyn Fairbairn said: ‘A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest. At present, the economic signals are mixed – we are in an unusually uncertain period.’

The CBI believes that the timing of a first rise in interest rates – which have been held at 0.5 per cent since 009 – will now be in the second quarter of 017, when they will go up to 0.75 per cent.

Rain Newton-Smith, CBI economics director, added: ‘Referendum uncertainty also appears to be dampening some activity in the near-term, and so put altogether, we do not now expect to see a rise in interest rates before 017.’