UK companies cut investment due to high prices and Brexit | Jobs

UK business leaders are slashing investment plans as high prices, Brexit deal difficulties and political uncertainty make bosses pessimistic about the economic outlook.

Many companies are now planning to cut rather than increase investments, according to the board’s latest executive poll. It’s the weakest indicator since October 2020 as nervous businesses curb spending.

British business investment appetite has fallen steadily since the beginning of the year, with input costs skyrocketing, the economy slowing and efforts to boost productivity undermining.

Business leaders are also less optimistic about their own prospects, with more than half saying the economic climate in the UK, along with rising energy costs and skills shortages, is having a negative impact on their organizations.

IoD’s Economic Confidence Index, which measures business leaders’ views of the UK’s economic outlook, was very low at -54 in July and only slightly higher than -60 in June. 69% of bosses were very or very pessimistic about the UK economy and only 15% were optimistic about the outlook.

Inflation, now at its highest level in 40 years, is the most common reason for pessimism, cited by a third of businesses. Nearly 20% of his pessimistic bosses said difficulties in the UK’s trade relationship with the EU were a major concern, as the introduction of customs checks and delays at the border have hampered exports. increase.

“Perceived macroeconomic risks continued to drive action by business leaders in July, with concerns over inflation, EU relations and political instability,” said Kitty Usher, chief economist at the Institute. I warned you. of directors.

According to official data, business investment has stagnated since the 2016 EU referendum. Then it plummeted when the Covid-19 pandemic started, and earlier this year he was still 9.1% below pre-pandemic levels.

Ussher also expressed concern about the recent waning confidence of business leaders in their prospects, saying, “This is something to watch over the coming months.”

The poll was conducted from 13 to 28 July, when the Conservative leadership race to replace Boris Johnson began.

The IoD said the “new political leadership team set up in the fall” should include stronger incentives for businesses to invest as part of a clear economic strategy to boost business confidence. I’m here.

Now, Liz Truss, the front-runner to become prime minister, has pledged to introduce low-tax, less-regulated investment zones across the UK if she takes power. Former Prime Minister Rishi Sunak, who introduced the tax cuts, promised to cut the number of boarded-up high street shops by helping local authorities quickly seize and reclaim empty commercial buildings. there is

Companies are also struggling to hire and retain employees as families are weighed down by the cost of living crisis. His one-fifth of midsize businesses say recruitment and retention issues are the biggest threats they face.

Nearly half of companies say they are offering new benefits to their employees, such as childcare assistance, free meals at work, and shopping vouchers. More than 4 out of 10 offer their colleagues her one-time bonuses because prices are outpacing wages.

The BDO also warned that some companies have been forced to suspend hiring and growth plans. A quarter have more debt, and repayment costs can be high as borrowing costs increase.

BDO LLP partner Kaley Crossthwaite said: “It is particularly concerning that companies are making additional loans and loans to control costs, even as interest rates are rising.”

The Bank of England is expected to raise interest rates again on Thursday as it seeks to keep inflation in check. Some Citi economists predict the BoE could raise bank rates by 50 basis points to 1.75% for him.

Investec chief economist Philip Shaw expects banks to agree to the first 0.5 percentage point rise since going independent 25 years ago, saying “the near-term inflation outlook is worsening”. .

“Rising gas prices mean that we expect CPI inflation to peak above 12% in October. We may fear a more aggressive wage response,” Shaw added.