Concerns over the likelihood of Brexit coming to fruition have severely dented UK businesses’ confidence, according to a new YouGov/Cebr study, which has found that the economic uncertainty of leaving the EU has led to businesses making fewer investments.
The data from the first YouGov/Cebr UK Economic Index (UKEI) has revealed that the economic fears of a Brexit in the EU referendum on 23 June have led to business confidence lagging behind consumer confidence.
To compile the findings YouGov spoke with over 1,500 business decision-makers over the past three months with respondents representing a diverse range of sectors and business sizes. In addition YouGov undertook 18,000 consumer interviews over this time period.
Results from the new detailed quarterly report into the economic views of both businesses and consumers have found that business confidence is 2.3 per cent lower than the consumer confidence, standing at 111.0 compared with 113.6.
As a result of the uncertainty the analysis has found that fewer organisations are making major capital investments over the next 12 months than has been the case during the past year. The business outlook also appears to be more one of negativity rather than just trepidation and as a result the study forecasts a continued loss of economic momentum over the coming year.
As well as uncertainty over future membership of the EU, businesses are concerned about a range of other fundamental issues. One in five (19 per cent) companies said the main challenge facing their business over the next year was either a weak domestic (13 per cent) or global economy (six per cent). YouGov and Cebr found that businesses other leading concerns about the future were competition (13 per cent) and regulation (11 per cent).
Meanwhile, consumer confidence continues to be in a holding pattern, as it has been for most of the past year. Living standards are being supported by very low inflation and rising earnings, leaving households more confident than businesses.
Reflecting on the studies findings Scott Corfe, director at Cebr, argued that “even without the uncertainty created by the referendum on EU membership, businesses perceive a general loss of momentum in the UK economy which is undermining confidence”.
He said: “In addition, intense competition is squeezing profit margins across a range of industries. This leaves businesses less optimistic than consumers, who are enjoying a rebound in living standards as inflation remains unusually low – quite an unusual divergence in trends between companies and households.”
YouGov’s head of reports, Stephen Harmston added: “Since the financial crisis consumers have become pretty well attuned about how broader economic changes affect their lives. Despite the ongoing uncertainty in the financial markets around Britain leaving the EU means UK consumers are holding tight – unsure about how things will play out over the coming year. Things could change quite quickly, though. Should the domestic economy falter – either because of weak growth or Brexit – it is likely that consumer confidence will start to drop.”
The findings indicate that the UK ad industry’s £18bn contribution to the UK media and entertainment industry will be held back amid the uncertainty which will further harm the UK economy given that it is the second largest sector behind TV.