FILE PHOTO: People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson/File Photo
July 7, 2019
LONDON (Reuters) – British companies are more worried about Brexit than at any time since the 2016 referendum decision to leave the European Union and they plan to reduce investment and hiring, a survey of chief financial officers showed on Monday.
The survey conducted by Deloitte, a financial advisory firm, found that 83% of the CFOs believed that leaving the EU would hurt Britain’s long-term business environment.
Only 4% said it was a good time to take on more balance sheet risk, the lowest percentage since the collapse of Lehman Brothers in 2008 which helped trigger the financial crisis.
Britain’s economy has slowed sharply after a strong start to 2019 when companies were rushing to prepare for the original Brexit date in March which has been delayed until Oct. 31.
Surveys published last week suggested the economy shrank in the second quarter and Bank of England Governor Mark Carney warned of the growing risks from a no-deal Brexit and from an escalation of trade tensions in the world economy.
Almost two thirds of the CFOs surveyed by Deloitte expected to cut hiring in the next three years as a result of Brexit and 47% expected to reduce capital spending.
British companies cut back on business investment throughout 2018, the longest such run since the global financial crisis, raising concerns about the longer-term impact of the Brexit crisis on the country’s economy.
Separately on Monday, the Confederation of British Industry, an employers group, said it expected business investment would fall by 1.3% in 2019, the biggest decline since the financial crisis, even if Britain manages to avoid a no-deal Brexit.
“Brexit uncertainty is crippling business investment. “We’re at risk of falling further behind our G7 competitors,” Rain Newton-Smith, the CBI’s chief economist, said.
The CBI kept its forecast for British economic growth in 2019 at 1.4% but cut its forecast for 2020 slightly to 1.5% from a previous estimate of 1.6%.
The Deloitte survey was based on responses from 79 CFOs, including 48 from FTSE 350 companies and was conducted between June 12 and 28.
(Reporting by Navdeep Yadav; Writing by William Schomberg, editing by Andy Bruce)
