According to a Bank of England survey, businesses are braced for a negative effect from the Brexit vote, with the construction industry being among the most pessimistic.
The central bank’s Agents Summary of Business Conditions surveyed a range of contacts with the aim of understanding how the vote to leave the European Union is expected to affect their businesses over the coming year.
Overall, respondents expected a negative effect from the vote on turnover, capital spending and hiring activity over the next twelve months. Output prices were expected to be boosted, on balance, as the rise in imported costs following the decline in sterling is passed through. That upward price effect suggests the effect on activity in real terms is more negative than that shown for turnover.
Across sectors, the expected effects on turnover were most negative for business services and construction. On corporate pricing, downward pressure on prices was expected for professional and financial services and construction, reflecting a weaker outlook for demand.
Expected effects on capital spending and hiring activity were negative across all sectors, but particularly so for construction businesses.
Consistent with the survey results, Agents’ scores for companies’ investment and employment intentions have weakened in absolute terms since the referendum result. Those scores point to broadly unchanged levels of staff numbers and capital spending over the next six and twelve months respectively.
The survey showed that Construction output growth had eased, with many contacts expecting a further weakening to come.