Brexit spurs biggest cut in UK business investment in 10 years, Latest Business News - The New Paper

Brexit spurs biggest cut in UK business investment in 10 years

This article is more than 12 months old

LONDON : This year, British companies look set to cut investment by the most in 10 years because of Brexit, even if Prime Minister Theresa May gets a deal to ease the country out of the bloc, an employers group said yesterday.

Business investment was forecast to fall by an annual 1 per cent this year, the British Chambers of Commerce (BCC) said. Weak investment by companies drags on productivity, which puts a brake on wage rises and weighs on the overall economy.

"Political inaction has already had economic consequences, with many firms hitting the brakes on investment and recruitment decisions," Mr Adam Marshall, the BCC's director general, said.

"Worse still, some companies have moved investment and growth plans as part of their contingency preparations. Some of this investment may never come back ."

Many financial firms have set up operations in other European Union countries, and carmakers have reduced their expansion plans in Britain.

Last year, business investment fell in each of the four calendar quarters, the longest such run since the global financial crisis.

Finance minister Philip Hammond says he expects a pickup in investment by companies once a Brexit deal is done. But the BCC said that the diversion of resources to prepare for the risk of a no-deal Brexit and the high up-front costs of doing business in Britain, as well as questions over Britain's future ties to the EU, would limit any quick investment rebound.

It lowered its overall growth forecast for Britain's economy to 1.2 per cent this year from a previous estimate of 1.3 per cent. - REUTERS