Brexit has not caused a sharp slowdown in business activity, Bank of England says

EU referendum has caused a sharp uptick in uncertainty among firms, but most firms are maintaining 'business as usual'

Hazel Sheffield
Wednesday 20 July 2016 16:00 BST
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Higher rates generally provide a bank with greater ammunition to trim rates if and when they need to
Higher rates generally provide a bank with greater ammunition to trim rates if and when they need to (Reuters)

Brexit has not caused a sharp slowdown in business activity, the Bank of England has said in its July report on business conditions.

The report is the first snapshot of how businesses around the UK are coping with the results of the EU referendum.

It said that while Brexit has caused a sharp uptick in uncertainty among firms, most businesses were maintaining "business as usual" while they formulated a plan for how to deal with the UK split from the EU.

Businesses around the country told Bank researchers that they did not expect to immediately change staff hiring plans because of the vote, but they did expect some negative impact on those plans over the next 12 months.

"As yet there was no clear evidence of a sharp general slowing in activity," the report said.

The Bank of England said that while consumer spending and construction had eased a little in the run-up to the EU referendum, this was offset by a pickup in manufacturing activity which meant that business activity was mostly flat before the vote.

Many businesses are embarking on strategic reviews of their operations over the coming months.

But few told the Bank that they would be exiting the UK in the near-term, though there were some reports of planned foreign direct investment being postponed.

A number of companies were considering alternative European locations for aspects of their business, and some contacts within large international firms expected their continental European operations to receive a greater share of future investment than their UK ones.

Employment in the UK was shown to have been resilient in the run-up to the referendum.

Data from the Office for National Statistics showed that unemployment fell below 5 per cent in March to May, the lowest since July to September 2005.

However analysts warned that the positive trend was likely to be reversed by the Brexit vote.

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