Forecasters Publish Lower Confidence Estimate for UK due to Brexit

The UK needs to prepare itself for weaker economic performance, two major forecasting groups have said, in the latest studies predicting the downsides of the Brexit vote.

Fragile business sentiment linked to Brexit-related anxiety, domestic political uncertainty and squeezed consumer budgets have caused UK business confidence to drop to its lowest point for almost six years, the economic consultancy IHS Markit reports.

Meanwhile, Britain’s economic growth will continue to weaken this year due to a Brexit-related consumer-spending squeeze and muted earnings growth, the EY Item Club said in the latest downgrading of its forecasts.

Chris Williamson, chief economist at IHS Markit, said: “Companies have become increasingly worried about the business outlook, largely as a result of heightened political uncertainties and the potential impact of Brexit.”

He added: “Business optimism about future prospects has sunk to its lowest for nearly six years, adding to a growing body of data which points to a slowing economy.

“The drop in confidence pushed the level of UK optimism below that seen in the eurozone for the first time in seven years, and contrasts with multi-year high levels of optimism in the United States and Japan. As such, the survey results suggest the UK is at risk of falling behind in an otherwise solid-looking global economic outlook.”

In a report published on Monday, IHS Markit said the “net balance” of UK firms expecting a rise in business activity over the next 12 months stood at +35% in June, markedly down from +52% in February and the lowest reading since October 2011.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza