Confidence drained away from UK businesses and consumers in August as the Brexit crisis deepened, according to surveys that suggested the political ructions were taking an increasing toll on the economy.
The Lloyds Bank Business Barometer slid to 1% from 13% in July, its lowest level since December 2011, when Britain was struggling to recover from the global financial crisis.
Separately, a survey of consumer confidence from market research company GfK was its joint weakest since mid-2013, driven lower by deepening pessimism about the economy.
The signs of a wilting economy – similar to elsewhere in Europe – raise the stakes for Prime Minister Boris Johnson.
If his gambit of suspending parliament to deliver Brexit on Oct. 31 fails, he may have to fight a national election while the world’s fifth-biggest economy falls deeper into malaise.
“(The surveys) do seem to indicate that the rebound in the third quarter that many of us anticipated on the back of a weak second quarter might be somewhat muted,” Peter Dixon said.
Britain’s economy shrank in the second quarter, a hangover from the stockpiling boom in advance of the original March Brexit deadline. Another contraction in the current quarter would officially herald a recession.
“It’s a fairly weakish environment, what with global problems and of course our own domestic issues to worry about,” Dixon added.
Business confidence declined in every region of the United Kingdom, Lloyds said, although the fall was steepest in the manufacturing-heavy East Midlands region of England.
British manufacturers, who account for about 10% of the economy, are facing the possibility of a no-deal Brexit which is likely to hurt their supply chains, plus a slowdown in the global economy.
Separate data added to signs the housing market, which slowed sharply after the 2016 Brexit vote, is stabilising.
British banks approved the greatest number of mortgages in two years during July, the Bank of England said, while mortgage lender Nationwide reported house prices increased at the fastest annual pace in three months.
At -14, the GfK survey was the weakest since January, before which it had been lower only in mid-2013. All the survey’s components, including the outlook for personal finances and the economy, declined in August.
“Until Brexit leaves the front pages – whenever that will be – consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation,” Joe Staton, client strategy director at GfK, said.
Another poll of consumers from U.S. bank Citi and pollsters YouGov showed inflation expectations among consumers for year ahead rose to their highest level since 2013.
“The increase could be driven by rising chances of a rupture with the EU on Oct. 31, which could lead to higher consumer prices via tariffs, supply disruptions and weaker sterling,” Citi economists said in a note.
By Andy Bruce
Source: UK Reuters