Lack of redundancies reveals most firms are still hoping to emerge relatively unscathed

There are thousands of businesses across Britain treading water, waiting for the Brexit fog to clear. They have stockpiled mountains of goods to offset delays at the ports and, if they are manufacturers, rented warehouses to store parts and raw materials.

Some, such as Bathstore, found they couldn’t hang on any longer. The bathroom retailer filed for administration last month after a rocky year when consumers cut back on big-ticket purchases, with new cars and newly installed bathrooms among the major purchases being shunned.

A rival retailer might come along to rescue a slice of Bathstore, just as there were partial rescues for Evans Cycles and House of Fraser – both by Sports Direct’s owner, Mike Ashley. But the current trend, which has seen most businesses think first of survival while some are undone and sink below the waves, is likely to continue until the politicians patch together some kind of deal with the EU.

This survival instinct and the hope of a sensible deal is why most firms are hanging on to their staff and why Britain can still boast having a near-record level of employment.

It might seem bizarre that companies are retaining high levels of staff when surveys conducted by IHS Markit and the Chartered Institute of Procurement and Supply showed that all sectors of the economy had stopped growing in June and some, including the manufacturing and construction industries, were shrinking.

Construction industry output was said to have “dropped like a stone” while manufacturers suffered a similar reversal, with a majority saying order books were shrinking and current activity was down on the previous month. It meant the industry suffered the sharpest drop in factory output for more than six years.

The prospect is that activity will continue to shrink as summer turns into autumn. What is remarkable is the optimism shown by most companies that some kind of Brexit deal will be done, possibly on 31 October or not too long afterwards.

Yet while the business surveys omit to ask about attitudes to Brexit, the lack of redundancies reveals that most companies expect to emerge from the current period of stasis relatively unscathed.

Contrary to the sense of doom from many commentators in the construction industry, Markit’s researchers said: “Demand for construction staff was relatively resilient in June, with the latest survey pointing to only a marginal fall in workforce numbers. Where a decline in employment was reported, this was often linked to the non-replacement of voluntary leavers.”

The same wait-and-see approach is detectable across most industries. Setting aside the 6,000 redundancies at Jaguar Land Rover, and the planned closures of Honda’s car factory in Swindon and Ford’s factory in south Wales, most manufacturers have hunkered down to see out the worst of Brexit.

Sadly, the portents for manufacturers are even more gloomy than for companies in other sectors.

Germany, the UK’s largest trading partner in the EU, saw its manufacturing “drop off a cliff” in May. Industrial orders fell 2.2% month-on-month when analysts were only expecting a marginal 0.2% drop.

Once bulk orders were stripped out the May data was even worse, declining by 3% from the previous month.

“This clearly suggests that the deterioration was genuine and not due to fluctuations in volatile bulk orders,” said analysts at HSBC.

Without Germany driving Europe’s factory output, the countries that rely on supplying this beast with parts – namely the British, Italian, Austrian, Czech and Swiss manufacturing industries – will suffer a downturn of their own.

The rest of Europe is not faring much better. A lack of demand across the 19-member euro currency bloc has already meant inflation is weak and prompted the European Central Bank to say it will begin a further stimulus programme.

At the margins, a cut in borrowing costs might help boost investment from the current lows levels, but it is unlikely to be the turbocharger needed.

For UK companies to begin growing again, business leaders are clear that the Brexit issue needs to be laid to rest, sooner rather than later.