We now have a fairly comprehensive read out on post-referendum sentiment across business and consumers. So where are we on our journey through the five stages of Brexit?
Today sees the release of the Markit Economics PMI for services, this completes the trio for the UK economy (along with manufacturing and construction) and allows some comparison of performance with other parts of Europe (US will come later today). This adds to the evidence that we’ve gathered from manufacturers on confidence levels in the sector and a range of consumer confidence related data. And basically none of it makes for cheery reading.
EEF’s EU referendum survey recorded the largest drop in business confidence since we started tracking it two years ago.
The services and construction PMIs (47.4 and 45.9 respectively) haven’t been this weak since 2009.
The manufacturing PMI also points to contracting activity in July, although the decline from June is less marked than in services and construction.
Consumers are feeling the referendum jitters too with both the GfK and the European Commission index showing hefty falls in confidence in July.
Is it really Brexit?
Confidence was generally expected to take a bit of a beating following the referendum and while there are a few other concerns lurking in the global economy – not least geopolitical risks, the health of some eurozone banks, a lack of productivity growth and so forth… – the UK was clearly an outlier in July, recording the biggest falls in confidence across business sectors and consumers. This would suggest that the added worries of exchange rate volatility, political uncertainty and weakening demand following the Brexit vote are specific to the UK – certainly for now.
What's the next stage of Brexit?
So if the initial reaction to the referendum outcome was a brief period of denial (does Brexit really mean Brexit?), it seems we’ve now moved into the anxiety phase. Businesses and consumers are worried about what comes next, how it will affect their growth plans, their job prospects, when should they make the next big investment or purchase?
In the coming months we’ll need to get through the bargaining phase, UK negotiators bashing out a deal with EU counterparts and businesses making sure their voice is heard in securing a deal that supports growth and prosperity here and in Europe. You can see how EEF is engaging with the negotiation process by signing up to our Intelligence Briefing.
This won’t last forever (we hope). My guess is that the next phase will be adapting to the new uncertainties. Hopefully with some more clarity about EU negotiations, Industrial strategy and measures to support confidence, businesses will get past the shock and get on with, well, business. And in time, we’ll hit the final phase of Brexit – the sunny uplands of opportunity.