Brexit: UK businesses set to slash investment as political turmoil increases

Business groups urge Chancellor Philip Hammond to provide some certainty over the future in upcoming Autumn statement

Manufacturers say they will scale back investment as political uncertainty around Brexit grows (Getty)

Manufacturers will cut back investment plans over the next two years because of increased political uncertainty following the Brexit vote, according to a new survey. Accountants also issued a separate warning saying that other firms are also scaling back their plans.

Both groups urged Chancellor Philip Hammond to provide stimulus for businesses in the upcoming Autumn Statement.

A survey of more than 300 manufacturers by the industry organisation EEF found that three out of five were planning to spend the same or less on plants and machinery.

Uncertainty over future orders was the main factor affecting confidence, but there has also been a sharp rise in the proportion of executives saying political uncertainty is putting them off investments, up from 6 per cent in March to more than a quarter now..

Theresa May’s Government has not yet laid out any concrete plans over the deal it is seeking in the Brexit negotiations. The survey was conducted before recent comments that suggested the Government would prioritise immigration controls over access to the single market. A hard Brexit would further dent confidence.

Ms Lee Hopley, the EEF's chief economist, said: “Fears of an immediate collapse in business investment appear to be unfounded for now.

“The spike in political risk should not go unnoticed. There is caution among businesses, which will inevitably make it more difficult to get big decisions across the line.

“It's over to the Autumn Statement now to press ahead with policies that further enhance the UK business environment for spending on modern machinery and increasingly important intangible investment.”

Charles Garfit of Santander, which helped produce the report, added: “It is an understandable reaction from manufacturers to scale back on investment, given the uncertainty, particularly as it follows a relatively buoyant phase for the sector.”

Meanwhile a survey of 1,000 accountants by the Institute for Chartered Accountants in England and Wales showed business confidence was down, even with an expected boost to exports from the 16 per cent slump in the pound's value since the June vote.

“Businesses are planning on slowing investment,” said Michael Izza, chief executive of ICAEW. “The forthcoming Autumn Statement is an opportunity therefore to encourage businesses to make the most of the fall in sterling.

The reports comes days after the Bank of England again warned the British economy would slow next year, although it was forced to admit that its earlier fears of a sharp short-term slowdown hadn’t materialised. It also warned that reduced investment by companies as well as less money in consumers’ pockets due to inflation would damage growth.