We haven’t seen the worse from Brexit, warns a new report by research company Dun and Bradstreet.
It’s cautioned that financial investment could drop in the UK after Article 50 — the official exit clause of the European Union Lisbon treaty — is invoked.
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The commercial data agency has released its latest UK industry report analysing the last quarter in 2016 and forecasting ahead.
The outlook for UK economy is looking gloomier as the weak pound pushes up inflation which we saw in the latest consumer price inflation figures which came in at 1.1 percent in November — the highest value in more than two years.
When it comes to real GDP expansion, Dun and Bradstreet forecasts the UK economy to grow by just one percent in 2017 and around 1.1 percent in 2018.
The weakness of the pound is expected to last until a Brexit deal is in place. As the Brexit bill is currently still under scrutiny in the House of Lords to discuss the triggering to Article 50, this could be a while.
It’s not just the weak pound that will cause the UK to suffer.
According to a survey the agency commissioned in November with 200 chief financial officers and directors, it was found that corporations in the UK will reduce future investments as Brexit is seen to be “financially damaging” for their companies’ growth models.
Brexit was considered as negatively impacting business growth potential by 64 percent of respondents, while around 49 percent said their company was likely to scale back on investment activities in the UK post-Brexit.
The biggest concern however for around 41 percent of respondents was the data availability from European partners and customers once Brexit was completed.
It appears that as the government attempts to deal with Article 50 negotiations, many companies will have to work out how this will affect their relationships with European counterparts too.
Dun and Bradstreet’s chief economist, Bodhi Ganguli, said:
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“Brexit negotiations are without doubt going to take time: it won’t be a quick and simple transition, and it is likely that we will need an interim agreement in the first quarter of 2019. Our expectation is that the UK economy and global markets will not completely recover until the UK fully negotiates its exit from the EU.
“With a heightened chance of failure, it’s paramount for businesses to ensure the correct risk management solutions are in place. Businesses should adopt a ‘wait-and-see’ approach as the UK’s economy continues to change quarter by quarter, and we will not see the full impact of the Brexit vote for many quarters to come.”
Despite the bleak outlook, confidence has risen in British exporters who believe their turnover should improve in 2017.
According to the latest quarterly international trade outlook from the British Chamber of Commerce businesses in both manufacturing and service are increasingly confident that profitability will increase or remain steady over the next 12 months.
The BCC/DHL Trade Confidence Index, which measures the volume of trade documentation, fell by 1.42 percent to 119.96 at the end of 2016 but remains nearly five percent up on the last quarter of 2015. The evolution of e-commerce and technology is credited with empowering businesses in overseas markets.
BCC director general, Adam Marshall, said:
“Many exporters remain confident, in spite of uncertainty over our relationship with the EU. Our findings serve as a reminder that it is businesses that trade with other businesses, not governments – but they need support if they are to continue to be positive.”