Continued uncertainty almost 100 days after the referendum, not helped by disparate comments from three senior Tories, has made this another tough week for a directionless economy.
Foreign Secretary Boris Johnson said Brexit negotiations could be over in less than two years, International Trade Secretary Liam Fox predicted trade with the EU will be “at least as free” after Brexit as now, and Tory grandee Michael Howard mistakenly said non-EU European countries enjoyed free trade with the EU. All added to fears of a hard Brexit.
Here are 6 signs of economic unease this week:
1. Confidence in Britain’s financial services sector dropped for a third consecutive quarter, according to business lobby Confederation of British Industries (CBI) and accountants PwC, based on data for the three months to September – the longest run of deteriorating sentiment since the start of 2009. The CBI also found retail sales volume growth tumbled unexpectedly from 6.2% in August to 0.5% in September, the lowest growth since early 2013.
2. A survey of 100 UK chief executives by business consultancy KPMG revealed three-quarters are considering moving operations abroad after Brexit. Insurance companies are also looking to relocate, particularly if a hard Brexit becomes a likely option. Indeed more than 20 European business associations and companies interviewed by Reuters said British banks would only have EU market access if the UK follows EU rules.
3. Sterling sank to a five-week low against the Euro on Monday. Against the dollar it was trading less than two cents above its three-decade post referendum low. Though Sterling had strengthened against the dollar early this month, continued uncertainty as parliament reconvened has affected investor confidence.
4. Markus Kerber, head of Germany’s largest business group, BDI, dismissed Brixiteers’ claims Germany would be a soft touch in Brexit negotiations and oppose tariffs on trade between Britain and the EU. Though 7.5% of German exports go to Britain, “92.5% goes somewhere else”, and it is important for Germany not to alienate other European markets, he told the BBC. In remarks that appeared to increase the chances of a hard Brexit, Kerber said the level of “political ill-will” in Europe against Britain was “much much bigger than economic rationality”.
5. Japan’s Nissan, the second largest carmaker in the UK, has told the British government it will scrap its investment plans in Sunderland unless the government can guarantee it will be compensated for increased tariffs on exports to the EU in the event of a hard Brexit. Britain has been a launchpad into the single market for Japanese companies. During the G20 summit earlier this month Japan demanded a series of business-as-usual guarantees for Japanese investments in Britain to continue,
6. On a more positive note, ratings agency Standard and Poor’s raised its growth forecasts for this year and next. Having previously said a Brexit vote could “paralyse” investment, it now estimates economic output could increase 1.8% this year and 1% in 2017, as the fall of Sterling boosts exports. However, these estimates are up by just 0.3% and 0.1% respectively since post-referendum estimates in July.
Edited by Yojana Sharma
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