BREXIT-related factors are still being flagged by UK companies as a cause of lost business from overseas, a senior economist has declared.
Chris Williamson, chief business economist at IHS Markit, underlined this drag as he noted the Chartered Institute of Procurement & Supply’s services, manufacturing and construction surveys pointed so far to UK economic growth of 0.2 per cent in the first quarter.
The latest services survey from CIPS, compiled by IHS Markit and published yesterday, showed a slowdown in growth in this key sector in February. The services business activity index fell from 53.9 in January to 53.2 on a seasonally adjusted basis but remained above the 50 no-change mark.
Some services companies flagged an impact on bookings from overseas visitors resulting from the COVID-19 coronavirus outbreak. They also highlighted delays to new projects among clients in Asia.
CIPS said: “There were a number of reports citing a negative impact on sales from the coronavirus outbreak, particularly to clients in overseas markets.”
In spite of the coronavirus outbreak, the survey shows UK services companies’ overall optimism about prospects for increased business activity on a 12-month horizon rose in February to its highest since March 2015.
Highlighting the continuing influence of Brexit, Mr Williamson said: “While Brexit-related worries have moderated significantly since late last year, Brexit uncertainty continues to dampen sentiment, with firms concerned about upcoming EU trade negotiations. Moreover, analysis of reasons cited by companies for changes in export orders indicates that Brexit-related factors continue to be seen as a cause of lost overseas business on balance.”
The UK left the EU on January 31, and is now attempting to secure a future comprehensive free-trade deal with the bloc before the transition period ends on December 31.
Howard Archer, chief economic adviser to the EY ITEM Club, noted the think-tank had trimmed its forecast of first-quarter UK growth from 0.4% to 0.3% because of some anticipated negative impact from the coronavirus outbreak.
This projected 0.3% quarterly growth rate, although weak by historical standards, would be an improvement from stagnation in the final three months of last year.
Mr Archer noted the effect on activity from this outbreak was likely to be “significantly more marked” in the second quarter, but expressed hopes it would be temporary.
He said: “A particular concern for the economy is business willingness to commit to investment is likely to have taken a renewed hit from the hit to the domestic and global economies from coronavirus and it may remain limited further out due to significant concerns and uncertainties over the UK-EU relationship.”
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