UK Businesses face dark times ahead of Brexit, with exports slowing down and the economy hurt due to Brexit chaos.
The British Chambers of Commerce’s (BCC) Quarterly Economic Survey Q1 2019 showed that the key indicators of UK economic health weakened in the first quarter of 2019. Export sales suffered, “improved cashflow”—an indicator of business health—turned negative for the first time since 2012, and investment intentions in manufacturing and services sectors have been at their lowest level for eight years.
After PM Theresa May’s Brexit deal options failed to be approved by parliament, she is now waiting for the EU to grant her some more time, as Brexit is now due to take place at 2200 GMT on April 12, unless there is some other alternative. Michel Barnier warned that a no-deal Brexit seems a more realistic outcome after the parliament rejected May’s alternative solutions. The three options offered, were common market, a customs union and a second referendum. The remaining possibilities are now a possible change of course with MPs seeking a closer future relationship with the EU, a no-deal Brexit on 12 April, or to offer support to May’s deal this week.
The chief negotiator talking in Brussels, said that a “positive vote” was necessary to avoid a cliff-edge Brexit on 12 April. He said: “No deal was never our desired or intended scenario. But the EU27 is now prepared. It becomes day after day more likely.”
Services sector and manufacturing
The BCC Q1 2019 QES includes results gathered from over 7,000 businesses across the UK employing around one million people and is the largest independent business survey of its kind in the UK.
The negative results were largely due to Brexit uncertainty and failing economic conditions worldwide. As Suren Thiru, the Head of Economics at the British Chambers of Commerce (BCC), explained: “Our latest survey suggests that UK growth nearly ground to a halt in the first quarter of 2019, with increasing anxiety over Brexit and weakening global economic conditions driving a significant deterioration in almost all the key indicators in the quarter.”
In his detailed analysis, he indicated that exports suffered, whereas the services sector had a marked decline in both domestic and international activity. He clarified: “The manufacturing sector continues to struggle amid tougher global and domestic trading conditions and rising cost pressures. The marked decline in the export indicators in both sectors suggests that net trade is likely to have been a drag on UK GDP growth in Q1. The deterioration in cash flow is concerning as it can leave firms more vulnerable to external shocks, including disruptions to supply chains.”
He concluded that, unless there was “substantial action,” the indicators for growth in the coming quarters are “disappointingly downbeat,” with “weakening orders” and confidence and investment intentions demonstrating the dark times ahead.
Brexit uncertainty and the current impasse in May’s party, her turn to the Labour party and Corbyn are increasingly proving how difficult it is to resolve the current political crisis which is dramatically affecting the economy and businesses working in the manufacturing and services sectors.
With business confidence in profitability and turnover deteriorating in the quarter, according to the survey, the leading business group has been calling for an end to Brexit chaos which has damaged business confidence and investment plans.
As May is desperately trying to ensure an orderly exit and provide firms with some sense of certainty for the future, the government should take into account the business community’s warning that the ongoing impasse will continue to impact on the sharp slowdown in the real economy across the UK.
If your business is exporting or importing goods, get in touch with us to discuss how we can help you get the most optimal exchange rates.