Businesses lose confidence after vote to leave EU

BRITAIN’S businesses are less confident about their future in the wake of the Brexit referendum, according to a survey of companies by Lloyds Bank.

It found a net balance of 19pc of firms reporting an improvement in business activity, a sharp drop from 41pc in July and the lowest level seen since December 2011.

The plunging figure indicates a turnaround from previous optimism. As business confidence is closely correlated with economic growth, the figure suggests the UK is likely to be heading for a slowdown.

There are still more firms reporting growth than reporting a deterioration in their fortunes, which indicates the slowdown may be modest rather than extreme.

However, the correlation works both ways – businesses lose confidence when they think the economy will perform poorly and a lack of business confidence cuts investment levels, which itself dents growth.

As a result the ultimate impact on the economy depends on how much investment firms make in the coming months, and how many choose to delay or cancel projects.

Not every sector is suffering. Industrial firms are increasingly confident and 33pc expect to hire more staff in the next year, the highest level in five months. There was also a small increase in the number of firms which are upbeat about the wider economic environment, from 37pc to 39pc.

This was outweighed by a larger increase in the proportion which believe the economy is getting worse, which rose from 20pc to 27pc, indicating the degree of uncertainty among Britain’s businesses over the impact of the Brexit vote.

“Our survey is consistent with a slowdown in UK growth prospects in the second half of the year and may reflect a growing expectation for some that a more challenging economic outlook will have a negative impact on their own company prospects,” said Lloyds’ senior economist Hann-Ju Ho. “Despite this, hiring plans continue to indicate resilience.”