UK business confidence is set to fall in the next two years as companies await further clarity on the progress of negotiations on the country’s future relationship with the European Union after June’s vote to leave.
Business expectations of investment show net falls of 3.2 per cent in 2016 and 3.6 per cent in 2017, according to a survey by the Institute of Chartered Accountants in England and Wales (ICAEW).
The latest forecast shows a big fall in confidence compared to the last survey carried out in the third quarter. Expectations for 2016 and 2017 have fallen by 1.3 percentage points and 2.4 percentage points respectively since September.
The survey of 1000 chartered accountants also finds that despite some recent improvements in the UK labour market, employment growth will slump to 0.2 per cent in 2017, down from 1.6 per cent this year. Meanwhile, inflation may start to be felt in consumer pockets as wage stagnation begins to take hold.
Stephen Ibbotson, ICAEW director of business, said: “The story of Marmite and PG Tips is just the beginning – retailers will be hit in 2017 and consumers will lose purchasing power as a result. Many households will be squeezed in 2017 due to a combination of inflation and sluggish wage growth.”
Despite Philip Hammond’s announcement of a fund to invest in productivity improvements, the ICAEW sees little effects on its forecasts.
“Government needs to offer businesses incentives that will restore business confidence,” said Ibbotson.