British businesses are becoming more willing to invest despite slowing consumer spending, according to a survey by the Bank of England.
The report from the Bank’s agents around the country showed businesses’ investment intentions point to higher spending over the next year, thanks to “largely resilient demand growth”.
The Bank of England expects business investment to grow by 1.75 per cent in 2017, well below the pre-financial crisis average levels of 2.5 per cent. However, strengthening investment intentions could bode well for forecasts of investment growth bouncing back in 2018.
Part of that anticipated boost to investment may come from exporters, who reported “more positive” expectations for their exports than has been recorded over the past few years, the Bank reported.
The Bank’s deputy governor Ben Broadbent has previously said the devaluation of sterling since the EU referendum could boost some forms of business investment, as exporters hit a “sweet spot”.
Exporters have been boosted by sterling’s fall, as their products become cheaper when bought in other currencies. The Confederation of British Industry (CBI) recently reported foreign orders rose to a six-year high.
However, that same fall in the value of the pound has dented consumer spending and domestic demand, the Bank found.
Consumer spending fell in real terms as inflation ate into spending power, although the Bank noted that some of the impact of higher prices had passed through to higher turnover, indicating consumers may be willing to spend slightly more to maintain their living standards.
This would tally with recent falls in the savings ratio for UK households to historically low levels.
Nevertheless, the Bank has noted consumption will probably slow as inflation eats into the pound in Britons’ pockets.