The share of British businesses that are pessimistic about the economic outlook over the next 12 months doubled from 25 per cent to 49 per cent after the vote to leave the European Union, according to a study by YouGov.
The YouGov/Cebr Business Confidence Index measures businesses’ outlook and involves a study of 1,500 people who represent a wide range of business, both in terms of size and sector. The index is based on backward and forward-looking measures covering organisations’ capital investment plans, exports, domestic sales, optimism in the economy, and optimism in the performance of own business.
A survey conducted just before the referendum found confidence levels across these categories stood at 112.6 points but then dramatically fell to 105.0 in research carried out in the aftermath of the result was declared.
"So far the only evidence we have for how the economy is in the wake of the Brexit vote comes from the markets which are showing a mixed picture. These figures show what is happening on the ground and they suggest a significant shock reaction,” said Scott Corfe, director at the Centre for Economics and Business Research.
“Not only are businesses feeling much more pessimistic in general about the state of the economy, but their own expectations for domestic sales, exports and investments over the next 12 months have gone off a cliff. Hopefully this is a short term panic reaction and confidence will edge up again once the dust settles.”
Businesses were also found to be increasingly pessimistic about their operations in the year ahead following the vote with hopes for domestic sales, exports and capital investment also dropping sharply.
Index tracking expectations for domestic sales fell by almost 14 points in a week (from 118.8 to 104.9), hopes for exports declined by 15 points (from 115.3 to 99.8) and investment dropped off by almost eight points (from 108.0 to 100.1).
This is among of a number of surveys conducted in wake of the UK's vote to leave the EU, all of which have painted a similar picture of how it is impacting business.
Marketers were found to be either pulling or pausing advertising spend just a week after the Brexit vote, supporting a prediction made by GroupM that more than £200m would disappear from ad budgets in 2016 in the event a Leave vote prevailed.
Meanwhile, according to a Retail Economics poll of 2,000 people, over one third of Britons are expected to tighten their purse strings in light of the vote. A further 58 per cent said they will also hold back any spending on non-essential items with the researchers predicting that electricals and DIY would be the sectors hardest hit.