BOE Says Businesses Delayed Spending Decisions Before EU Voteby
Financial-services firms saw new business flows weaken
Report comes one day before U.K. referendum on EU membership
The Bank of England said some U.K. businesses may have postponed spending decisions in the run-up to Britain’s referendum on its membership of the European Union, with spillover effects seen at legal and financial firms.
The central bank’s quarterly summary from its agents showed some reports of delays in decision-taking on corporate spending amid uncertainty before Thursday’s vote. Professional and financial services companies also said new business declined and capital market issuance slowed as investor appetite waned.
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“The flow of new work for professional and financial services firms had weakened, with some clients delaying major business decisions during the pre-referendum period,” the report said. “That was reflected in a slowing of M&A, IPO, and commercial real estate investment activity.”
The document marks the BOE’s final publication before the EU vote. Governor Mark Carney has drawn the ire of the “Leave” campaign for the bank’s comments on the possible economic implications of a decision to exit. He’s clashed with lawmakers over the issue and his input has been branded as “propaganda” by some.
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The BOE report also said that, broadly, investment intentions for the year ahead were “consistent with modest growth.” On hiring plans, it said that “heightened uncertainty about the economic outlook had a mildly depressing effect.”
A survey by the Confederation of British Industry published Tuesday showed uncertainty may also be weighing on U.K. manufacturing exports, even as the pound posted a 1.1 percent decline against the dollar over the past six months.
“The recent fall in the pound appears to have done little for our exporters,” said Rain Newton-Smith, CBI director of economics. “It may be that the growing uncertainty in the run-up to the EU referendum, combined with global risks elsewhere, has offset some of the benefits of a weaker currency at this time.”