Shockwaves from Britain’s vote to leave the European Union are reverberating through the economy with surveys published on Thursday (28 July) showing a sharp dive in consumer confidence and a slowdown in the construction sector.
A month after the Brexit vote, the latest signals of a sharp economic slowdown are likely to add to expectations of action from the Bank of England on 4 August when most economists say it will cut interest rates and might start buying bonds again.
An index of consumer confidence plunged nearly five points to 106.6 in July – matching a fall seen in October 2014 – to touch its lowest level in a monthly survey in three years, polling firm YouGov and the Centre for Economics and Business Research (CEBR) said.
“The public are still absorbing the EU referendum result but it is clear that consumer confidence has taken a significant and clear dive in the month after the Brexit vote,” Stephen Harmston, Head of YouGov Reports, said.
People are particularly worried about what will happen to the value of their homes, the survey found.
“If homeowners’ fears over their property prices are realised then there could be a very serious impact to both the housing sector and the economy in general,” CEBR director Scott Corfe said.
Economists say spending by consumers offers the best hope that Britain can avoid a Brexit recession. But retailers said sales fell sharply after the referendum, according to a survey published on Wednesday (27 July).
In construction, growth in activity slowed after the vote, the Royal Institution of Chartered Surveyors (RICS) said.
Contributors to a RICS survey predicted a 1% rise in workloads over the next 12 months, down from growth of 2.8% they had foreseen in the first quarter.
Britain’s property market has been one of the worst hit sectors since the referendum, with housebuilders seeing their market values plunge while investors pulled out cash from commercial funds, forcing many to be suspended.
Construction firms cut back their forecasts for hiring, mirroring moves by British retailers who reported the fastest fall in full-time equivalent employment in two years in the second quarter, as the referendum approached.
But a survey by the British Retail Consortium showed 93% of retailers intended to keep staffing levels unchanged in the next three months, compared with 83% in the second quarter of last year.
A third survey published on Thursday showed pay awards in Britain stuck in a slow gear.
Median pay settlements in the three months to the end of June were worth 1.8% for a third month in a row after a two-year run during which increases of 2% had become the norm, according to XpertHR, an online human resources firm.
“It remains to be seen how the uncertainty around the impact of the Brexit vote will feed through to pay settlements, but we are likely to see pay awards remaining subdued for many months to come,” XpertHR’s Sheila Attwood said.