Brexit uncertainty clouds over UK business investments

Recent reports revealed by the British Chambers of Commerce (BCC) suggest that UK firms are investing more in contingency plans. According to reports, this development cannot be regarded as sustainable, thus insinuating that the firms should direct concrete efforts to encourage economic growth.

As reported, it is observed that business investment will contract faster during the year due to drawing concerns in issues related to Brexit and the year will also see a slower recovery growth than previously anticipated.

According to a BBC forecast source, the growth rate for 2019 was upgraded, owing to the fast rate of stockpiling that occurred earlier in the year. However, according to the report, the growth rate would be subdued in 2020 and 2021. In addition, the forecast revealed growth figures in the UK in 2019; which had raised to 1.3% from the previous 1.2%. This is foreseen to drop to 1.0% from 1.3% in 2020 and will sink from 1.4% to 1.2% in 2021.

“Businesses are putting resources into contingency plans, such as stockpiling, rather than investing in ventures that would positively contribute to long-term economic growth,” reported the BBC source.

It also unveiled that the Brexit uncertainty was likely to ‘suffocate’ investments in the short term and hinder the growing possibility of a no-deal. Furthermore, it adds that the UK is trying to avoid a ‘messy and disorderly exit from the EU.’

In a statement by economist Suren Thiru, he commented, “The revisions to our forecast suggest that the UK economy is likely to remain on a disappointingly subdued growth path for some time to come. The downward pressure on business activity and investment intentions from the unwinding of stocks is likely to be exacerbated by increasing cost pressures and Brexit uncertainty, slowing overall economic growth across the forecast period. The deteriorating outlook for business investment is a key concern as it limits the UK’s productivity potential and long-term growth prospects.”

Thiru drew attention to one of the crucial risk factors in UK’s economic future; if the UK left the EU without a deal or transition period on October 31, it would further weaken UK’s growth trajectory, which would thus deteriorate economic conditions for the country, he added.