Business investment has \u201cdampened\u201d as entrepreneurs are left in the dark over Brexit, a new analysis has revealed.<\/p>\n
The study, published by the Institute of Chartered Accountants in England and Wales (ICAEW), looks at the outlook for economic growth in the UK.<\/p>\n
It comes after the accountancy regulator cut the UK\u2019s economic growth forecast in 2019 from 1.5 per cent to 1.1 per cent, suggesting that \u201cmanufacturing shutdowns\u201d and \u201cno-deal Brexit stockpiling\u201d has hurt the economy\u2019s output.<\/p>\n
Business investment has also slowed in the second quarter of 2019, falling 0.5 per cent compared to the three month period before.<\/p>\n
This represents a cut in investment in five of the past six quarters, with the ICAEW suggesting that the outlook for business growth depends on the way the UK departs from the EU. The regulator added that even 2019\u2019s Q1 \u201csurprise increase\u201d could be attributed to factors other than a strong economic performance, such as the introduction of a new accounting standard for companies.<\/p>\n
Commenting on Brexit and business growth, the regulator said an agreement would not entirely eliminate uncertainty over the future trading relationship with the EU, but is likely to boost confidence.<\/p>\n
\u201cThe weakness of business investment is particularly striking against a backdrop of sluggish economic growth, and reflects Brexit uncertainty. After the 2008 recession business investment recovered, but since 2015 it has stalled and gone into reverse,\u201d said Michael Izza, Chief Executive of ICAEW.<\/p>\n
\u201cWhile the overriding priority for the government must be to get a good deal, an investment boom is unlikely even if the UK secures an \u2018orderly\u2019 departure from the EU.\u201d<\/p>\n
Highlighting that a withdrawal agreement would not \u201celiminate uncertainty over the future UK-EU trading relationship\u201d, Mr Izza added that \u201cstructural issues mean firms are more likely to spend money on labour than capital\u201d.<\/p>\n