Business investment growth slows ahead of Brexit vote

Jake Cordell
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As ballot papers arrive, investment growth has slowed
As ballot papers arrive, investment growth has slowed (Source: Getty)

Businesses investment is set for a modest slowdown in the second quarter of the year, as the UK economy creeps towards its vote on EU membership, taking place in just 13 days, accountants have said.

The Institute of Chartered Accountants (ICAEW) has predicted growth in corporate spending will dip to 4.1 per cent in the three months to the end of June, down from 5.2 per cent in the first period of the year, according to its figures. The group said it was an "investment slump" which showed the UK economy was "staggering towards the EU referendum".

By contrast, official figures compiled by the Office for National Statistics (ONS) showed that business investment actually fell in the first three months of the year.

Read more: Exports grow at fastest pace since before the crisis

However, manufacturing and exports data released earlier this week showed the UK economy appeared to be holding up ahead of the referendum. At an annualised expansion of 4.1 per cent, investment will still grow significantly faster than GDP, wages, employment and productivity this year.

Business confidence dropped to a four-year low, the ICAEW added, however, suggesting that investment growth was stalling ahead of the vote as nervy boardrooms become less likely to splash the cash.

"It is worrying that economic growth is not picking up momentum," said ICAEW chief executive Michael Izza.

"With a staggering economy and uncertain political future, it is not surprising that some companies are reticent to invest as they are calculating risks. There are hurdles in the way of our economic recovery, not least the EU referendum, but also a fragile global economy."

Despite predictions of a economic paralysis in the months before the vote, the National Institute for Economic and Social Research (Niesr) has forecast the UK economy expanded by 0.5 per cent in the three months to May, up from 0.4 per cent in the first quarter of the year.

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