Referendum result has panicked UK businesses that are in need of reassurance
So far the only evidence we have had about the state of the economy following the Brexit vote comes from the markets, which are showing a mixed picture. However, new figures from YouGov and Cebr unveiled on last night's Newsnight show that business confidence in the UK has plummeted following the decision to leave the European Union.
We conducted two waves of research among decision makers in organisations of all sizes – one just before the referendum result was announced and one after it. In just a week the YouGov/Cebr Business Confidence Index has fallen from 112.6 to 105.0. These figures show what is happening on the ground after the Brexit decision and suggest businesses are in a state of shock.
Last week we saw consumer confidence slump as a result of the Brexit vote and this week we can clearly see the impact of the referendum result on businesses. The share of businesses that are pessimistic about the economic outlook over the next 12 months doubled from 25% to 49% in the course of a week.
Meanwhile there is growing gloom when the decision makers we spoke to assess the outlook for their own organisations. Before the referendum 16% were pessimistic about their businesses prospects, after the referendum this leapt to 26%.
Not only are businesses feeling much more pessimistic in general about the state of the economy, but their own expectations for domestic sales, exports and investments over the next 12 months have gone off a cliff. The index tracking expectations for domestic sales fell by almost 14 points in a week (from 118.8 to 104.9), hopes for exports declined by 15 points (from 115.3 to 99.8) and investment dropped off by almost eight points (from 108.0 to 100.1).
As with consumers, a major reason for this reaction from the business community comes from the sense that no one has a plan, no one knows what is going on, and no one really knows what happens next. Hopefully this is a short term panic reaction and confidence will edge up again once the dust settles.
What all the players in the economy are searching for at the moment is certainty. Markets have calmed somewhat as a result of Bank of England's efforts. The government and other bodies need to make sure businesses and consumers now need to feel the same.
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