A new survey carried out last week showed that confidence in the UK’s economic prospects among financial services professionals is at a record low.
A poll of its members by trade body the Chartered Institute for Securities & Investment (CISI) showed confidence was at its lowest level since it began the survey in 2012. Of the 1,062 respondents, 55 per cent were less optimistic about the UK’s economic prospects, up from 35 per cent a year earlier.
Twenty-one per cent of respondents felt more optimistic and 24 per cent were unchanged, compared to 30 per cent optimistic and 25 per cent unchanged a year previously. The confidence indicator (the sum of positives less the sum of negatives) is -34, which is the lowest score since the survey started.
CISI chief executive, Simon Culhane, said: “Our survey results match those of the latest Association of Chartered Certified Accountants member survey which showed confidence in the UK’s economy is at its lowest level since their report first launched in 2009. In addition, the CBI’s latest survey showing confidence of UK manufacturers’ outlook has dropped to -23, the lowest level since the Brexit referendum.”
He added: “Business’s abhor uncertainty, they can’t plan, they can’t invest and they can’t recruit and now, with less than two months before the UK plans to leave, we have complete uncertainty, so this survey result is no surprise.” The survey ran from September 28, 2018 to January 21, 2019.
Last week, a survey of chief financial officers by Deloitte showed more than three quarters thought the UK would be worse off outside the EU.
Approximately 80 per cent of Chief Financial Officers (CFOs) surveyed by the Big Four accountant said they expected the long-term business environment to be worse after Brexit. Over 100 CFOs took part in Deloitte’s survey, including CFOs of 20 FTSE (Financial Times Stock Exchange) 100 and 41 FTSE 250 companies.
The UK is scheduled to leave the bloc on March 29 this year but there are questions around that departure date, after the House of Commons ordered Theresa May to reopen negotiations with the EU following her historic defeat in January.
Nearly half – 49 per cent – of those surveyed said capital expenditure will slow, up from 44 per cent in the third quarter of last year. Deloitte chief economist Ian Stewart said: “This survey shows that uncertainty over Brexit is driving a marked shift towards defensive balance sheet strategies among British businesses.
With the UK’s growth prospects heavily dependent on the so-far-uncertain nature of its exit from the EU, corporates are cutting back on expenditure and focusing instead on cost reduction.
Stewart added: “Corporates are positioned for the hardest of Brexits, with risk appetite at recessionary levels and an intense focus on cost control. Businesses seem to be increasingly pricing in a worst-case outcome. Anything better, including a delay or deal, could deliver a Brexit bounce in sentiment.”
Senior partner and chief executive of Deloitte north west Europe, David Sproul, said the attitudes highlighted in the survey demonstrated a “hunkering down” among CFOs. “Unless a favourable deal is agreed, it seems likely that this current lack of appetite for investment or recruitment will continue,” said Sproul.
Meanwhile, fellow auditor EY (Ernest Young) said the UK has a stronger rate of economic growth in its grasp for 2019 and 2020 if it clinches a withdrawal deal with the EU by 29 March.
However, if the UK leaves the EU without a deal, growth forecasts will drop to just 0.7 per cent this year and 0.6 per cent the following year, with the “very real possibility” of economic stagnation and mild recession in the second half of this year.
Latest figures show that Brexit has curtailed acquisitions for UK companies. Acquisitions of UK businesses by foreign buyers dropped by 11 per cent in the last quarter of 2018, as uncertainty around a Brexit deal forced EU bidders to adopt a “wait and see” approach.
Data from law firm Pinsent Masons shows the number of foreign buyers fell from 159 to 142 between the fourth quarters of 2017 and 2018, with a 22 per cent drop among EU buyers.
However, the number of US and Japanese buyers rose marginally in the same period, spurred by a strong dollar and Yen against the pound.
(The author is our foreign correspondent based in the UK. He can be reached on andyjalil@aol.com)
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