Brexit Shockwaves Impact UK Consumers, Companies Prepare for Slowdown – Reuters

By Giles Elgood and Costas Pitas

LONDON (Reuters) – The aftermath of Britain’s decision to leave the European Union is impacting the economy, with recent surveys indicating a significant decline in consumer confidence and a slowdown in the construction sector.

In response to the potential economic downturn related to Brexit, Lloyds Banking Group announced plans to reduce its workforce by 3,000 jobs. Additionally, Inchcape, one of the country’s largest car dealerships, forecasts a slowing growth in new car registrations.

Just over a month after the referendum, these latest economic indicators are expected to heighten anticipation for actions from the Bank of England on August 4, when many analysts predict a reduction in interest rates and a possible resumption of bond purchases.

According to a poll conducted by YouGov and the Centre for Economics and Business Research (CEBR), the consumer confidence index dropped nearly five points to 106.6 in July, marking its steepest decline in six years and the lowest level recorded since 2013. Stephen Harmston, Head of YouGov Reports, commented, “The public are still absorbing the EU referendum result, but it is clear that consumer confidence has taken a significant and clear dive.” The survey also revealed heightened concerns about the future value of homes.

Although house price growth slightly increased in July, mortgage lender Nationwide warned that this data might not fully capture the referendum’s impact due to a time lag.

Economists believe that consumer spending is vital for Britain to steer clear of a recession triggered by Brexit. However, retailers reported a sharp decline in sales following the referendum, as noted in a survey released on Wednesday.

In the construction industry, a slowdown in activity was reported following the vote, according to the Royal Institution of Chartered Surveyors. Contributors to a RICS survey now expect a 1 percent increase in workloads over the next year, a decrease from the 2.8 percent growth they had anticipated in the first quarter.

The property market has been severely affected since the referendum, with housebuilders experiencing a notable drop in market values and investors withdrawing from commercial funds, leading to suspensions in many cases. Construction firms have also revised their hiring forecasts downward, reflecting a trend observed among British retailers who reported the most significant drop in full-time equivalent employment in two years during the second quarter, as the referendum date approached.

Nevertheless, a separate survey conducted by the British Retail Consortium indicated that 93 percent of retailers plan to maintain their staffing levels in the upcoming three months, which is an increase from 83 percent in the second quarter of last year.

Another survey released on Thursday highlighted that pay awards in Britain are stagnating. Median pay settlements for the three months ending in June remained at 1.8 percent for the third consecutive month, following a period of approximately two years where 2 percent increases were standard, according to data from an online human resources firm.

Sheila Attwood from XpertHR noted, “It remains to be seen how the uncertainty around the impact of the Brexit vote will affect pay settlements, but we are likely to see pay awards remaining subdued for many months to come.”