Brexit uncertainty weighing heavily on firms’ order books

The order books of British firms are at their emptiest for almost three years because of uncertainty over the outcome of the referendum on EU membership, according to the latest Monthly Business Trends survey conducted by accountants BDO.

UK car production line
The survey's output index, which tracks the orders in hand at UK companies, fell to 99.7 last month, almost a point down from April and the first time since September 2013 that the index has been below 100. Businesses' growth expectations also fell for the tenth month in a row.According to BDO, the survey reveals that uncertainty ahead of the 23 June referendum "has cast a shadow over the UK economy". Peter Hemington, a partner at the company, added, "Private sector capital investment has been sluggish throughout this recovery, and recent official figures show sharp falls – no doubt related to Brexit fears."This fall has no doubt contributed to UK businesses' expectation that economic growth will fall behind its long-term trend for the first time in nearly three years."In the end, investment drives productive capacity, growth and living standards. After the referendum, we must see businesses starting to invest or we face a worrying future."However, a report from the Society of Motor Manufacturers and Traders (SMMT), also published on Monday, showed that the nation's resurgent auto industry continued to grow in May, with sales 2.5 per cent higher than a year earlier. A total of 203,585 cars were registered last month, the highest May figure in 14 years although the monthly rate of growth recently has been below the three per cent rises recorded last year.Mike Hawes, SMMT chief executive, said, "The new car market in May remained high with compelling offers available on the latest vehicles, but the low growth is further evidence of the market cooling in the face of concerns around economic and political stability."Whether this is the result of some buyers holding off until the current uncertainty is resolved or a sign of a more stable market for new cars remains to be seen."Meanwhile, the latest Markit/CIPS purchasing managers' index (PMI) for the UK's services sector, which accounts for more than three-quarters of the country's GDP, showed that growth remained weak.Although the reading of 53.5 in May was up from 52.3 in April, it still reflected the lowest rate of expansion in the sector for three years.Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the PMI report indicated that the growth in the UK economy was "slowing sharply" in the second quarter, primarily as a result over uncertainty of a Brexit."Around one third of services firms reported demand had been detrimentally affected by uncertainty about the outcome of the referendum, in line with the proportion of manufacturing and construction firms," he said.

For more Relocate Global news and features about the implications of a vote for Brexit, visit our enterprise, UK and Europe sections.

Read more about how the UK economy is weathering seismic changes from around the world including the uncertainty over Brexit in David Sapsted’s analysis for our Spring 2016 edition.

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