Business development · 29 March 2018

Brexit nerves see business owners put brakes on growth

Brexit nerves
Manufacturing output slowed in the last quarter

Squeezed household spending and Brexit nerves have put the brakes on growth among private sector businesses this year, industry data has suggested.

According to the latest Growth Indicator from the Confederation of British Industry (CBI), which surveyed 650 small business owners across the distribution, manufacturing and services sectors, the balance of firms reporting a rise in output in the three months to March was +8 per cent.

The figure is down from the +20 mark recorded in the three months to February.

The CBI said manufacturing output grew at a slower pace in the quarter to March with total order books “softening” and export order books remaining unchanged.

Meanwhile, service sector growth was described as lacklustre over the past three months, with both business and professional and consumer services seeing flat volumes.

In the retail sector sales volumes failed to rise for the sixth quarter, hit by the squeeze on household incomes. The Beast from The East snowstorms also froze demand.

The CBI said it expected quarterly GDP growth to remain subdued at an average of 0.3 per cent, broadly similar to that seen over 2017 and about half the average rate seen since 2013.

It said real household incomes would continue to be squeezed by relatively high inflation and sluggish wage growth and there was continued uncertainty around Brexit restraining business investment growth, particularly spending on large projects.



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However, trade was being boosted by the lower pound and strong global growth.

The CBI said the UK economy remained subject to a high degree of “downside risk” particularly next year, where a “more disruptive outcome from EU negotiations could lead to a more adverse impact” on the economy and financial markets.

“Slower growth underlines the challenges we’re seeing in consumer-facing sectors, which are most exposed to the squeeze on household budgets. Growth in manufacturing has also lost some steam compared with recent highs,” said Rain Newton-Smith, CBI Chief Economist.

“Firms will welcome the agreement of a transition period with the EU, which will provide many hundreds of businesses with the confidence to put their contingency planning on hold and keep investing in the UK.

“Yet uncertainty remains, so it’s vital the government provides the best environment for enterprise by partnering with business on industrial strategy, and fixing the apprenticeship levy to make it easier for firms to deliver high quality training.”

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