British economy 'stalling' amid intensified Brexit worries

Alba, a white German Shepherd dog, wearing a European flag stands with supporters of Britain remaining in the European Union as they protest opposite the Houses of Parliament in London, Monday, Feb. 4, 2019. Prime Minister Theresa May was gathering pro-Brexit and pro-EU Conservative lawmakers into an "alternative arrangements working group" seeking to break Britain's Brexit deadlock. (AP Photo/Matt Dunham)

LONDON — With Brexit less than eight weeks away, it's becoming clear that the British economy is stalling as firms struggle with the uncertainty over what will happen.

Hot on the heels of the news that carmaker Nissan is scrapping plans to build a new SUV in its plant in northeast England, a survey on Tuesday showed that the British economy as a whole is almost flat lining.

Financial information firm IHS Markit said Tuesday its "all-sector" purchasing managers' index, which incorporates gauges of manufacturing, construction and services activity, dipped to 50.3 points in January from 51.5 the previous month. Were it to fall below 50, it would be indicating a fall in output.

"The survey results indicate that companies have become increasingly risk averse and eager to reduce overheads in the face of weakened customer demand and rising political uncertainty," said Chris Williamson, chief business economist at IHS Markit.

Though the survey takes a snapshot of only one month, it provides a steer as to the economy's momentum. The Bank of England, for example, watches the survey as it assesses its monetary policies.

The Bank of England is due to keep its main interest rate on hold at 0.75 percent on Thursday. There will be particular interest in its updated economic forecasts in light of the Brexit impasse. Surveys from the likes of IHS Markit, but also from the Society of Motor Manufacturers and Traders, are all pointing in the same downward direction amid the Brexit impasse.

Britain is due to leave the European Union on March 29 but it's still completely unclear how it will do so after Prime Minister Theresa May's Brexit withdrawal deal with the bloc was overwhelmingly defeated by lawmakers last month.

A scramble to come up with an alternative plan has yet to yield any results and there are mounting fears that Britain could end up crashing out of the bloc with no deal on future relations. That would likely mean new tariffs on British exports and serious disruption to trade between the two sides.

Given that backdrop, firms don't know how to plan, whether to invest in new plants and machinery or not, or whether to recruit staff.

According to the survey, firms in the services sector, the bedrock of the British economy, are particularly uneasy and increasingly reluctant to hire new staff. New orders are at their lowest level since July 2016, the month after Britain voted to leave the EU in a referendum.

"With no deal in sight, business and consumer caution will only intensify, risking a first quarter contraction," said James Knightley, chief international economist at ING.

People also read these

Global stocks lower, except for Tokyo, on Yellen...

Aug 29, 2016

Most global stocks slipped Monday on remarks from the U.S. Federal Reserve late last week that the...

Asian stocks mostly rise on hopes for higher US...

Aug 30, 2016

Asian shares were mostly higher Tuesday as speculation continued about a U.S. Federal Reserve...

Japanese Defense Ministry seeks record $51...

Aug 31, 2016

Japan's Defense Ministry is seeking a record-high $51 billion budget for the 2017 fiscal year to...

Japan raids Mitsubishi Motors over...

Sep 2, 2016

Japanese transport ministry officials raided the Tokyo headquarters of scandal-stricken Mitsubishi...

Stocks rise as US jobs report puts Fed rate hike...

Sep 2, 2016

Stock rose and the dollar fell on Friday after a key report showed the U.S. economy added slightly...

About Us

Frontal Report is an emerging leader in all forms of media. We aim to be the leading news brand for readers around the world.

Contact us: sales[at]frontalreport.com

Subscribe Now!