Bank of England survey provides nuanced view of Brexit hit

Growth slowed across British business services and consumer spending eased last month, a Bank of England survey has shown. It offered a more mixed picture of the economy than some of the gloomier indicators since June’s Brexit vote.

The Bank of England released some of the findings of its August regional agents’ survey in last week’s quarterly inflation report, which showed companies expected the referendum would hurt capital spending, hiring and turnover over the coming year.

Although the latest report suggested the economy is likely to slow, the monthly survey of around 700 companies was not as starkly downbeat as the larger purchasing managers’ indices PMI.

“This survey therefore adds some weight to the view that the immediate sharp drop in the (PMI) indices may have been a slight over-reaction,” said James Knightley, senior economist at ING.

Last week’s Markit-CIPS PMIs suggested the UK economy was contracting at the fastest rate since the 2008-09 financial crisis.

Bank of England deputy governor Ben Broadbent cited this in an interview last week as one reason why the bank cut interest rates to a new record low and launched stimulus measures to the financial system.

Revenue growth in business services firms eased to a three-year low, according to the Bank of England survey. However, for consumer services companies the slowdown was much smaller.

The Bank of England’s gauge of retail sales values fell to its lowest level since August 2012, but the central bank linked some of this to unusually wet weather.

In recent days, major retailers including supermarket Tesco and department store and food retailer John Lewis said they had not yet been affected by the referendum result, and the British Retail Consortium reported strong spending growth.

In common with other business surveys, however, the Bank of England said investment and employment intentions wilted last month.

“With British businesses suggesting that they are pulling back on expansion plans the survey is consistent with the general consensus expectation among economists that the UK will experience a mild recession over the next six to 12 months,” ING’s Mr Knightley said.

Last week the Bank of England forecast growth rates would slow to just above zero for the rest of the year but — partly reflecting the expected effect of its own stimulus measures — stopped short of predicting recession.

The world’s largest recruitment firm, Adecco, said that it has not been hit so far by the UK vote, as it forecast modest growth.

“We don’t see any material impact of Brexit, either in the UK or in the neighbouring countries and the UK’s trading partners”, chief executive Alain Dehaze told Reuters after the company posted in-line results for the second quarter.

Adjusted for trading days, Adecco generated organic revenue growth of 3% in the quarter, in line with rival Randstad.

Volume growth in July was similar to June, it said.

Organic revenue in the UK and Ireland, its third-biggest market, rose a headline 6% as growth in professional staffing and information technology helped offset a decline in finance and legal.