Britain’s biggest companies are beset by doubts about the future after last month’s vote to leave the EU and have slashed their investment plans, according to a survey that bodes poorly for the UK economy.
Some 82% of chief financial officers from FTSE-350 and large private companies expect to cut capital spending in the next year, the biggest proportion on record and up from 34% in the first quarter, accountancy firm Deloitte said.
Its survey is one of the first clear signs the vote to leave the EU has battered business confidence, and corroborates the Bank of England’s view that the UK economy is set to weaken soon.
While the British central bank unexpectedly left interest rates on hold last week, its chief economist Andy Haldane said a “material easing” of policy would be needed next month to help cushion the expected slowdown.
The Deloitte survey was conducted between June 28 and July 11, after the referendum and just before Theresa May emerged as Britain’s new prime minister.
Almost all the CFOs surveyed said the level of uncertainty facing their businesses is above normal.
“Perceptions of uncertainty have soared to levels last associated with the euro crisis five years ago,” said Ian Stewart, Deloitte’s chief economist.
“The spike in uncertainty has had a toxic effect on business sentiment, with optimism dropping to the lowest level since our survey started in 2007 - lower, even, than in the wake of the failure of Lehman in late 2008.”
More than two-thirds of CFOs in the survey said they believed leaving the EU will hurt the British business environment in the long-term.
In the next three years, 58% of CFOs surveyed said they expected capital spending to be “somewhat” or “significantly” lower.
Some 73% of respondents said they were less optimistic about their company’s financial prospects, a record high, and 83% expected to slow the pace of hiring.
“CFOs do not seem to be waiting for growth to slow before adjusting direction. There has been a marked shift to more defensive balance sheet strategies in the wake of the referendum,” said Mr Stewart.
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