Growing numbers of business leaders in the UK believe Brexit uncertainty will take longer to resolve than Boris Johnson pledged before the election, according to a Bank of England survey.
In a reflection of the challenges the government faces in striking a trade deal with the EU before the end of the year, Threadneedle Street said the date at which firms expected the issue to be clarified had been pushed further into the future.
According to the central bank’s decision maker panel, which surveys almost 3,000 chief financial officers from small, medium and large UK firms, as many as 42% said they thought the lack of clarity over Brexit that their business faced would not lift until at least 2021, up from 34% in November.
The findings come as factory output across the UK plunged in December at the fastest rate in almost seven and a half years, according to a separate survey. Both Brexit uncertainty and a wider manufacturing downturn around the world weighed on businesses.
In a sign of the stress firms face, IHS Markit and the Chartered Institute of Procurement and Supply said that manufacturing production levels fell more in December than they had since July 2012. Factory output also fell sharply in Germany and other EU nations. Activity levels have slumped around the world as the US-China trade dispute continues.
The prime minister made a promise to “get Brexit done” the central plank of his election campaign, saying he would ensure Britain leaves the EU by the end of January and strike a trade agreement with Brussels by the end of 2020.
Though rising numbers of companies believe it will take longer for questions to be answered over Brexit, about a third of responses to the Bank of England survey were received after the 12 December election. The Bank said there had been some increase in clarity over Brexit since the poll.
It said its gauge of Brexit uncertainty fell to a six-month low in December, but that it remained well above the average levels recorded since the EU referendum three and a half years ago.
On an unweighted basis, 55% of firms said Brexit was an important source of uncertainty for their business in December before the election, the same as recorded in November. This proportion fell to 49% after the election.
Duncan Brock, the group director at Cips, said the result would bring some clarity for businesses, but that the pace of the decline in December would “set alarm bells ringing” and that manufacturers still had unanswered Brexit questions.
“Though the result of the general election will bring some clarity to businesses, it still feels like a long road ahead for manufacturing to recover its losses from this year and there will still be some obstacles to overcome in 2020,” he said.
The IHS Markit/Cips manufacturing purchasing managers index, which the government and the Bank monitor for early warning signs from the economy, dropped to 47.5 in December from 48.9 a month earlier. The PMI has been below the 50.0 mark, which separates economic growth from contraction, in each of the past eight months.
Fhaheen Khan, an economist at Make UK, the manufacturing industry lobby group, said: “Manufacturers will hope that the next 12 months will see greater bandwidth within government to focus on a long-term vision for the economy as there remains much work to do before industry will turn on the taps of investment.”
