U.K. Business Looks to Hammond for Reassurance as Slowdown Seenby
Firms see downward pressure on profit and investment
Chancellor set to deliver Autumn Statement on Nov. 23
U.K. businesses are looking to the government to provide reassurance later this month as they brace for slower profit growth and weaker investment.
Confidence among businesses remained negative this quarter, according to a survey of 1,000 accountants between July 26 and Oct. 21 by the Institute for Chartered Accountants in England and Wales. That’s even with an expected boost to exports from the pound’s 16 percent depreciation since the June 23 vote to leave the European Union.
Firms have been rocked by uncertainty about their future trading relationship with the bloc since the Brexit referendum. The EEF, a manufacturing organization, said separately on Monday that while spending on plants and machinery remained stable in August, it’s will decline in response to the changed outlook for demand.
While Chancellor of the Exchequer Philip Hammond has indicated that there will be be no spending splurge in his mini-budget, known as the Autumn statement, on Nov. 23, he may announce measures to bolster sentiment.
“Businesses are planning on slowing investment,” said Michael Izza, chief executive of ICAEW. “The forthcoming Autumn Statement is an opportunity therefore to encourage businesses to make the most of the fall in sterling.”
The group said the weaker pound is pushing up costs, but many companies won’t be able to pass that on to customers. With many firms working below capacity, that’s putting pressure on profits and investment, it said.
“There is caution amongst businesses, which will inevitably make it more difficult to get big decisions across the line,” said Lee Hopley, chief economist at EEF. “It’s over to the Autumn Statement now to press ahead with policies that further enhance the U.K. business environment.”