Cautious UK companies begin belt-tightening as business investment stutters in the face of oil price crash and fears of Brexit

 
Jake Cordell
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Oil investment to fall
Investment in new oil and gas projects could fall by more than 80% this year. (Source: Getty)

British firms may be battening down the hatches and trimming back on business investment in the face of global turmoil and the Brexit referendum, according to statistics released this morning.

Official figures showed that the amount invested by firms into new assets like buildings, machines, equipment, and intellectual property, slipped by two per cent in the final quarter of last year to £43.3bn.

Number crunchers at the Office for National Statistics (ONS) said belt-tightening in the North Sea probably accounted for the slowdown.

With the price of oil still below $40, a spike in investment from explorers still looks some way off. Industry lobbyists, Oil and Gas UK, estimates spending on new projects will fall by more than 80 per cent this year - down to just £1bn from an average of £8bn over the last few years.

Britain’s love affair with property, however, was enough to offset some of the slowdown in heavy industry, with the amount ploughed into “private sector dwellings” - both building new houses and repairing old ones - up by 1.2 per cent on the quarter to £15.7bn.

Scott Bowman, UK economist at Capital Economics, said the figures showed “the recovery remains unbalanced”.

“With activity indicators suggesting growth hasn’t improved at the start of this year and with Brexit uncertainty and a renewed fiscal squeeze weighing on demand, growth in 2016 looks likely to come in at or below 2015’s rate,” Bowman added.

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