August 8, 2022

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UK businesses slash investments due to soaring prices and Brexit

2 min read

UK business leaders are slashing investment plans as soaring prices, Brexit trading difficulties and political uncertainty all leave bosses pessimistic about the economic outlook.

As many firms are now planning to cut investment as to increase it, according to the Institute of Directors’ latest poll of business chiefs. That is the weakest reading since October 2020, as nervous firms rein in spending.

UK businesses’ investment intentions have been falling steadily since the start of the year, as input costs have soared and the economy has slowed, undermining efforts to lift productivity.

Business leaders are also less upbeat about their own prospects, with over half saying economic conditions in the UK are having a negative impact on their organisation, along with soaring energy costs and skills shortages.

The IoD’s Economic Confidence Index, which measures business leaders’ view of UK economic prospects, remained very low at -54 in July, only slightly higher than June’s -60. Sixty nine per cent of bosses were either very or quite pessimistic about UK economy, while just 15% were optimistic about the outlook.

Inflation, now at a 40-year high, was the most common reason for pessimism, cited by a third of firms. Nearly 20% of pessimistic bosses said difficulties in the UK’s trading relationship with the EU were their main worry, as the introduction of customs checks and delays at the border have hampered exports.

“Perceived risks in the macroeconomy continued to drive the behaviour of business leaders in July, with concerns around inflation, our relationship with the EU and political instability causing investment intentions increasingly to be put on hold,” warned Kitty Ussher, chief economist at the Institute of Directors.

Official data has shown business investment stalled after the 2016 EU referendum. It then plunged when the Covid-19 pandemic began, and was still 9.1% below pre-pandemic levels earlier this year.

Ussher is also concerned by a…

Business Matters

2022-08-01 05:44:06

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