More bosses rein in hiring and investment plans amid concerns of no deal – Deloitte

This article is more than 1 year old

This article is more than 1 year old

British businesses are the most anxious they have been about Brexit since the 2016 referendum, with more bosses reining in hiring and investment plans, a study has found.

The accountancy group Deloitte has warned that worries over the long-term impact of Brexit are mounting. This is pushing down optimism over future prospects as firms fear their trading relations with customers in the European Union could be disrupted next year.

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Deloitte’s latest survey of chief financial officers found that only 13% are more optimistic about the prospects for their company than they were three months ago. That is a sharp fall compared to July, when 24% expected conditions to brighten.

Gloom over Brexit has risen, too; 79% of CFOs say they expect the long-term business environment to be worse as a result of leaving the EU, up from 75% in the second quarter of 2018. This is the third consecutive quarterly rise, to the highest level since the referendum.

“CFOs have become more pessimistic about the long-term effect of the UK’s departure from the EU,” Ian Stewart, the chief economist at Deloitte, said.

“Large corporates are pulling in their horns, with just 12% of CFOs saying now is a good time to take a risk and 44% expecting their own capital spending to be lower over the next three years.

“Indeed, CFOs are more negative about the effects of Brexit today than at any time since the EU referendum.”

Deloitte interviewed 95 CFOs, including 18 at FTSE 100 companies and 36 at smaller firms listed on the FTSE 250. Half the group warned that hiring will slow over the next three years as a result of Brexit, up from 40%.

British businesses are increasingly worried that Britain might crash out of the EU in March 2019 without a transition arrangement. The outgoing chief executive of the insurance market Lloyd’s of London, Inga Beale, revealed on Sunday that her firm is accelerating Brexit contingency plans to transfer contracts to a Brussels subsidiary, with the risk of a no-deal Brexit rising.

“We’re accelerating that plan as it seems to me we might be closer to a no deal than we were,” Beale told the BBC.

The British Chambers of Commerce is also concerned that Brexit uncertainty is hurting the UK economy and dragging down growth.

The BCC’s quarterly survey of business sentiment found that the percentage of services firms attempting to hire new staff is at its lowest level for 25 years. Only 47% of companies said they were looking to recruit, down from 60% three months ago and the lowest since 1993.

The BCC also reported a slowdown in the number of manufacturers reporting higher export orders, despite the weaker pound making UK exports more competitive.

Factories are suffering from a rise in raw material costs, which is forcing many to raise their own prices.

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Dr Adam Marshall, the director general of the BCC, warned that UK businesses are “stuck in limbo” as negotiations with the EU rumble on.

“These figures reinforce what we are hearing from businesses up and down the country – the uncertainty over Brexit, and the lack of bold moves to boost business at home, are starting to bite,” Marshall said.

“It should be a matter of grave concern to government that sales and orders both at home and abroad are stagnating. Weaker sterling is no longer proving a boon to many of our exporters, while consumer spending is failing to boost the domestic market.”