The snap election; a hung parliament; slow Brexit negotiations. These are just a few of the factors creating uncertainty in the UK, with a knock-on effect on business confidence - which has fallen to -8 in Q3, after rising to 6.7 in Q2.
Political uncertainty is causing British businesses to adopt a cautious approach, according to the Business Confidence Monitor (BCM), produced by the Institute of Chartered Accountants in England and Wales (ICAEW).
"The fall back into negative territory is not unexpected," said Mathew Rideout, ICAEW director of business. "Since the announcement of the general election, a vacuum has been left with [the] Government's attention swallowed by a hung parliament and the start of EU negotiations. The industrial strategy has been lost in the void, coupled with no clear signal towards post-Brexit policy. As a result, businesses cannot see through this haze of uncertainty and are struggling to look further than the end of the next quarter in terms of their decision making."
GDP growth for Q3 is forecast at 0.2 per cent, down from 0.3 per cent in Q2; businesses are not investing at the levels necessary to generate faster growth. Job creation, although positive, is not increasing; and a similar picture can be seen in staff development and R&D budgets.
The value of the pound sterling has fallen rapidly since the Brexit vote, but while export growth is being maintained, it has not risen. Now, hopes on that front are falling as the pound edges towards recovery.
In addition, household incomes will continue to be come under pressure, with businesses hold wage growth to a rate below inflation as they seek to control costs.
"If they haven't already, businesses need to look beyond the next few months to a future where innovation and investment now will create a longer term return," Rideout advised.
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