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No decrease in activity since Brexit vote, says Bank of England

While business uncertainty has risen since the EU referendum, the Bank of England (BoE) so far reports that there has been “no clear evidence of a sharp general slowing in activity".

Reflecting the surprise brought about by the Brexit vote, new research from the BoE reveals that many firms had no business strategy in place to deal with the EU Referendum’s ‘leave’ outcome and are only now starting to devise new business plans. Many are looking to maintain “business as usual” for the foreseeable future.

Presently there is a lack of information on which to base major decisions, many firms say. And so far the Bank hasn’t seen many indications of disinvestments, such as firms exiting the UK.

That said, the Bank has reported that some companies have started to consider relocating certain aspects of their business to other European countries and opinion from within some of the larger international firms is that their continental European operations will start to receive a greater share of future investment than before the EU Referendum.

Meanwhile, other companies have suggested that they may move production back to the UK, given the fall in the value of sterling.

One sector which appears to have been hit by the uncertainty brought about by the EU referendum is the commercial real estate sector.

Housebuilding companies have reportedly become more cautious in their approach to land acquisition and a survey of the UK commercial market published by the Royal Institute of Chartered Surveyors (RICS) has found that capital value and rent are falling.

In the same survey, nearly a third (36%) of chartered surveyors thought the UK commercial market was at the early stages of a downturn, while over half (54%) in London had the same view.

Jeff Matsu, RICS senior economist, said: “Political and economic uncertainty in the aftermath of the referendum result has clearly dampened sentiment in the commercial property market, with the tone becoming visibly more cautious right across the UK.

“Although the impact is widespread, the drop in confidence has been most pronounced in London.

“Nevertheless, following several years of strong capital value and rental gains, momentum had already appeared to be slowing.

“Whether or not the sharp deterioration in the RICS survey data is a kneejerk reaction that will unwind as the result is digested, or the start of a more prolonged downturn, remains to be seen.”

Transactions within the residential housing market have, however, been more resilient than some experts had expected, despite the dip in housing market sentiment in the days directly following the referendum.

Similarly, while credit conditions appeared to contract slightly in financial markets, early evidence so far indicates that banks’ appetite to lend following the referendum has not decreased.

Jeremy Leaf, north London estate agent and former RICS residential chairman, said:

"The Bank of England’s findings bear out what we have seen since the referendum. Yes, many people have been knocked sideways by the result but since then, they have just been getting on with it.

"The Bank of England survey refers to a dip in housing market sentiment immediately following the referendum but transactions have been more resilient than expected. On the ground we have seen determination on behalf of people to negotiate hard and a new sense of realism emerge.

"Lenders still seem keen to lend, which will help support the market, while it looks as though the next move in interest rates will be downwards, making mortgages cheaper still and providing a further boost."