LONDON • British companies are likely to cancel projects that they have put on hold because of Brexit uncertainty if the country leaves the European Union without a deal, Bank of England deputy governor Ben Broadbent has said.
Business investment fell throughout 2018 as companies waited for clarity on the terms of Brexit and grew only slightly early this year, a situation Mr Broadbent described as "remarkable", given that the economy was still growing and company profits were high.
With just days to go before Britain was to leave on March 29, Prime Minister Theresa May asked the EU for more time to negotiate a deal. Brexit has now been delayed until Oct 31, unless there is an earlier agreement.
Some Brexit supporters have said Britain should leave the EU now with no agreement, as businesses would at least know they would have to revert to trade on World Trade Organisation terms.
But Mr Broadbent said surveys showed companies viewed this scenario as the most negative of all.
"It would be wrong to conclude... that the best thing for investment is to resolve this uncertainty as soon as you can, by any means necessary," Mr Broadbent said on Monday in a speech to Imperial College Business School in London.
"Deliberately choosing the outcome firms say they view most negatively is more likely to mean that capital projects that have so far been deferred are then simply cancelled," he said.
Mr Broadbent said the impact of uncertainty on business investment appeared to rise as the Brexit deadline neared - making it important to avoid giving businesses further false hope of an immediate resolution to Brexit uncertainties.
"A repeated series of cliff-edges, each of which is expected to be decisive but in reality just gives way to the next cliff, is more damaging for investment than if it had been clear at the outset that the process will take time."
Earlier this month, Bank of England governor Mark Carney said business investment was likely to continue to be weak, but should improve if Brexit took place smoothly.