Although the depreciation of the Sterling has boosted manufacturing exports, rising manufacturing costs and inflation could eat into those profits. The British economy is going through a rollercoaster ride: although currently it’s moving downwards all depends on its negotiation team’s prowess during its divorce settlement.
In what is stated to be the largest survey of its kind – one involving 7,000 business, the survey conducted by the British Chamber of Commerce (BCC) has managed to capture key metrics of the country’s turnover confidence and business investment.
As per the results of the survey, the British economy seems to be losing steam: the services sector have shown a marked slowdown with major business boardroom beset by doubts over the country’s economic future, following its historic vote to leave the European Union.
Although Britain’s economy has fared better than what most economists forecasted following Brexit, Monday’s survey heighten concerns about the country’s long term prospects.
According to Deloitte, an accounting house, British firms have reported only a partial rebound in business morale having witnessed a nosedive following Brexit.
With investors increasingly expecting a “hard Brexit”, with Britain set to lose many of its preferential trading terms with the EU, the sterling hit a 31 year low.
So as to address these fears, the Confederation of British Industry and other groups had approached the government on Saturday in order to rule the “really worst” trade options, and thus unblock investments which are held back by fears that the Brexit negotiation talks will prioritize other goals over this.
Although the sterling hitting its 31-year-low has boosted Britain’s manufacturing exports, the slowdown in the services sector is worrisome since it is the backbone of the country’s private sector economy.
“The slowdown in services is concerning because it obviously is the dominant sector in the UK economy. It’s slowed down to levels we haven’t seen in several years,” said Adam Marshall, the BCC’s acting director general.
He went on to add that too much should not be read into this single quarter’s data, since the country’s economy was treading downhill before the referendum.
However, investors consider the BCC and Deloitte’s surveys as consistent with the view that the economy has slowed down considerably after Brexit.
Already investors are doubtful whether the country’s central bank, the Bank of England, will cut interest rates again this year. Although consumer spending has increased, the Sterling saw its 31-year new low.
As for the BCC, it has underlined the fact that its latest survey that gauges British investor’s sentiment from the period of August 22 to Sept 12, is in line with its forecast that Britain’s economic growth will be just 1% in 2017.
This is significant, since this is only 50% of its average growth rate since the recession of 2008-09.
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