The chances of the UK’s economy picking up steam yesterday diminished further as surveys showed major companies have curtailed their investment plans and that consumers spent less on their credit cards.
The reports added to a string of lackluster economic data that has raised questions about the chances of the Bank of England (BOE) raising interest rates this year.
Accountancy firm Deloitte said business optimism at large UK companies fell sharply in the second quarter, dampened by the inconclusive outcome of last month’s national election.
Deloitte’s survey of chief financial officers showed 72 percent thought the overall business environment would be worse once the UK leaves the EU, the largest proportion since Deloitte started asking the question a year earlier.
Only 8 percent of respondents saw an improvement after Brexit.
“This underscores the importance of the Brexit negotiations producing a favorable environment for UK businesses, with access to the skills and markets they need for their future success,” Deloitte North West Europe chief executive David Sproul said.
The survey’s findings have proven a good predictor for the BOE’s own investment intentions survey which BOE officials watch closely as part of their monitoring of the UK’s economy.
Businesses are pressing British Prime Minister Theresa May and her government to negotiate a smooth Brexit in two years’ time, saying an abrupt departure would deter investment.
Deloitte said investment intentions among chief financial officers deteriorated, probably disappointing some BOE policymakers who have been pushing for the first interest rate hike in a decade.
Rate-setter Michael Saunders last week said he was “reasonably confident” that an improvement in exports and investment would more or less offset the consumer slowdown.
A separate survey from credit card firm Visa showed consumer spending fell last month, capping the weakest quarter in nearly four years and adding to other signs that shoppers are reining in their spending due to rising inflation and weak pay growth.
Spending in the April to June period was 0.3 percent lower than in the same three months last year.
“June data provides further evidence that an increase in the cost of living, coupled with slowing wage growth, are beginning to squeeze household disposable income,” Visa managing director Kevin Jenkins said.
Survey compiler IHS Markit this year said the figures might add to calls for the BOE to keep interest rates on hold.
The strength of official data on wages, due today, is likely to be critical for BOE policymakers as they mull whether to raise interest rates from their record low 0.25 percent.
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