The current political instability in Britain is likely to impact the country’s economic growth this year, said Standard & Poor’s chief economist for the European, Middle East and Africa.
“For the time being, the outlook remains negative,” S&P economist Jean-Michel Six told the AJEF association of financial journalists in Paris. “In terms of the outlook for growth, it’s clear that things are not going in the right direction.”
“This latest bit of instability can only weaken the business environment and consumer confidence.”
Indeed, British business confidence has fallen sharply since last Thursday’s inconclusive general election that left Theresa May weakened ahead of Brexit talks, according to a survey by the Institute of Directors (IoD).
The survey of nearly 700 members of the business group also exposed deep concern over the political uncertainty and its impact on Britain’s economy.
The IoD found a negative swing of 34 points in confidence in the UK economy from its last survey in May.
While 20% of members were optimistic about the economy over the next 12 months, some 57% said they were either quite or very pessimistic — a -37 “net confidence” score. That compares with a -3% score in May.
“It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could — if not addressed immediately — be disastrous for the UK economy,” said Stephen Martin, director general of the IoD.
The IoD survey said its members saw no clear way to quickly resolve the political situation, feeling that a further election this year would have a negative impact on the economy.
They are keen to see quick agreement with the EU on transitional arrangements for the UK’s withdrawal from the bloc, and clarity on the status of EU workers in Britain.
Elsewhere, the Confederation of British Industry, said there was now a risk that businesses would cut back on investment which has largely held up since last year’s Brexit vote.
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