A survey by the Confederation of British Industry has shown that concerns over a no-deal Brexit and rising global trade barriers were the primary factors that slowed down British businesses growth to its lowest rate in almost last six years.
Compared to zero in January, private sector growth as measured by the CBI fell to -3 in February.
The rate was the slowest since April 2013 which has stoked fears that there is a shrinking of the private sector in Britain as the country comes close to March 29, the date the UK is scheduled to leave the European Union. There was also concerns among companies about the ongoing trade war between the US and China which resulted in a bleaker outlook for the next three months.
The worst affected element of the British economy was the manufacturing sector which has been in recession as officially declared. However a more than anticipated and a sharp slowing of the services sector – one of the mainstays of the British economy, was the major drag on the growth index being dragged down in the three months to February.
A sharp reduction in household earnings and the fears of a no-deal Brexit, which had kept away investments by businesses, had put under pressure private sector businesses as indicated by the growth indicator, the CBI said.
“More and more companies are hitting the brakes on investment and day-to-day business decisions are becoming increasingly problematic,” the CBI’s chief economist, Rain Newton-Smith, said.
In another survey on manufacturing businesses published last week clearly indicated that most of the manufacturers had been stocking up raw materials and finished goods to the highest level since records began in 1992 in preparation to possible delays at the border because of a hard Brexit.
“Until politicians can agree a deal that commands a majority in Parliament and protects our economy, growth will continue to suffer and long-term damage will be done,” Newton-Smith said.
There has been increasing concerns among economists about the tendency of British households to maintain levels of spending last year as they used up their savings and from making additional borrowings. On the other hand, there was a 3.7 per cent drop in investments by businesses in 2018 even as most of the other developed economies showed an increase in business investments.
In the three months to March this year, Britain’s economy will grow by only 0.2 per cent according to prediction by the Bank of England. The central bank said that growth in the period would be the lowest since 2009 even though a transition period to a new trade arrangement between the UK and the EU has been included in a vote in parliament for a Brexit deal.
The CBI survey was based on responses from 650 businesses in retail, manufacturing and services.
(Adapted from TheGuardian.com)