LONDON • Britain's economy appears to be losing steam, with major business surveys showing a marked slowdown in the service sector and boardrooms beset by doubt about the future following the country's vote to leave the European Union.
While the economy has fared better than most economists had been expecting since June's Brexit vote - largely thanks to upbeat consumers - surveys released yesterday will heighten concerns about its longer- term prospects.
Key measures of business investment and turnover confidence hit four-year lows in the third quarter, the British Chambers of Commerce (BCC) said in its quarterly economic survey of 7,000 businesses - the largest of its kind.
Separately, chief financial officers (CFOs) in major British firms reported only a partial rebound in business morale after a post-Brexit vote nosedive, according to a Deloitte survey.
Investors have become increasingly concerned that Britain will lose many of the preferential trading terms it has with the EU - a so-called "hard Brexit" - pushing the sterling to a fresh 31-year low against the United States dollar last week.
While the BCC survey, conducted between Aug 22 and Sept 12, offered some signs that the weak pound has boosted manufacturing exports, it also pointed to a noticeable slowdown among services companies that form the backbone of Britain's private sector economy.
"The slowdown in services is a concern because it obviously is the dominant sector in the British economy. It has slowed down to levels we haven't seen in several years," BCC acting director-general Adam Marshall told Reuters. He added that it was important not to read too much into a single quarter's data, pointing out that growth had appeared to be slowing before the referendum.
The Deloitte survey - conducted at 124 large firms from Sept 12 to Sept 26 - suggested that the outlook for capital expenditure and hiring improved in the third quarter, compared with its previous poll of CFOs taken in the immediate aftermath of the Brexit vote.
"The animal spirits of the corporate sector took a battering in the wake of the referendum and, three months on, Brexit continues to loom large for the British corporate sector," said Deloitte chief economist Ian Stewart. "CFOs remain concerned about the long-term impact of Brexit and two-thirds believe it will lead to a deterioration in the British business environment."
About 40 per cent of CFOs said they expected to cut investment over the next three years, down from 58 per cent just after the referendum, while 46 per cent expected hiring to slow, down from 66 per cent before.
Rising inflation looks likely to be another issue for businesses next year. The BCC survey showed a sharp increase in the proportion of manufacturers expecting to increase prices, reflecting a sharp increase in raw material costs - in part due to the sterling's weakness.
Investors have become increasingly doubtful that the Bank of England will cut interest rates again this year, given robust consumer spending and the sterling's renewed plunge. But policymakers will regard the two surveys as consistent with their view that the economy will slow markedly next year.