Survey of U.K. Manufacturing Firms Shows Fastest Drop in Optimism Since 2009
July 25 2016 - 10:54AM
Dow Jones News
By Jason Douglas
LONDON--A survey of British manufacturing firms in July paints a
mixed picture of the sector's prospects in the immediate aftermath
of Britons' vote to leave the European Union, adding to signs that
the road ahead may be bumpy for the U.K. economy.
The Confederation of British Industry, an employers' lobby
group, said its regular survey of sentiment in the sector showed
the fastest decline in optimism among manufacturing executives
since 2009, reflected in a sharp pullback in investment intentions.
But exports are expected to rise on the back of a falling
pound.
The findings add to signs the economy is at risk of slowing, but
the scale and duration of any slowdown won't be known until firm
data begins to trickle out in the fall.
Rain Newton-Smith, the CBI'S chief economist, said the
government needs to do more to dispel the uncertainty surrounding
the economy's prospects now the U.K. has voted to leave the EU.
Voters chose to quit by 52% to 48% in the June 23 referendum.
"It's important now for the new government to steady the ship
with a plan, and a clear timetable, for negotiating the U.K.'s
relationship with the EU. This, along with a renewed focus on
industrial strategy, will help give firms the confidence they need
to grow and create jobs," she said.
The CBI said the balance of firms expecting a pickup in orders
over the next three months fell to zero in July, its lowest level
since January 2012. The balance reflects the percentage of
respondents expecting an improvement versus those anticipating a
decline. July's reading followed a reading of +14% in April.
The balance expecting an improvement in exports was +10%, down
from +20% in April but still signaling healthy growth. Firms
credited the falling pound with supporting export expectations, but
they warned they expect it to push up costs, and ultimately prices
for consumers.
The CBI's findings echo those of other surveys conducted in the
aftermath of the vote. The CBI quizzed more than 500 firms between
June 27 and July 13.
A survey of purchasing managers in services and manufacturing
published by financial information group IHS Markit Ltd. Friday
found activity fell in July to its lowest level since 2009, a
signal the wider economy likely slowed. Separately, the Bank of
England last week said its network of regional agents reported a
marked increase in perceptions of uncertainty among businesses,
with some saying they were reconsidering investment and hiring
plans for the year ahead, but firms said they didn't intend to cut
spending and investment in the near term.
Write to Jason Douglas at jason.douglas@wsj.com
(END) Dow Jones Newswires
July 25, 2016 11:39 ET (15:39 GMT)
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