LONDON—Business leaders’ confidence in the British economy has sunk to its lowest level in more than 18 months, as the risk grows toward a “no-deal” Brexit in a little over three months, the Institute of Directors (IoD) said Dec. 27.
The group, which represents business directors and leaders, said its confidence tracker briefly reached positive territory earlier this year when there was agreement on a Brexit transition period, but has fallen steadily since April and hit its lowest level this month.
Prime Minister Theresa May faces deep opposition from both her own lawmakers and opposition parties to the divorce agreement she has negotiated with the EU, raising the risk of a “no-deal” departure, something that could hurt the economy.
IoD senior economist Tej Parikh said there’s no doubt that the tumultuous Brexit process is having a damaging impact on firms’ outlooks.
“Business leaders are looking ahead to the New Year with trepidation about the economy,” he said. “While we saw cautious optimism emerging when the Brexit talks appeared to be moving towards a transition period after March 2019, that has utterly dissipated now.
“The prospect of a no-deal in the near future will be weighing heavily on directors’ minds.”
Pessimistic But Upbeat
Business investment has fallen for three consecutive quarters, official figures showed earlier this month; other recent data has pointed to a slowdown in growth ahead of Britain’s exit from the European Union in 93 days.
The IoD said, however, that while business leaders are pessimistic about the economy, confidence in their own firms remains relatively upbeat.
Optimism levels for the wider economy stood at -38 percent in December, the group said, but the corresponding level for respondents’ own companies was +30 percent, little changed from 31 percent a year ago.
The IoD said 724 business leaders contributed to the survey in December.
The Bank of England has previously warned that a no-deal Brexit could plunge Britain into dire economic straits, worse than those brought on by the global financial crash a decade ago.
The bank warned at the end of November that the economy could shrink by as much as 8 percent in a year, and, in the case of a disorderly no-deal, 25 percent could be wiped off the value of the pound.
Rain Newton-Smith, chief economist of the business organization CBI, said, “These forecasts paint a bleak picture over the long-term of a no-deal Brexit or a Canada-style deal. It surely puts to bed some of the more far-fetched ideas that a hard-landing Brexit will not seriously hurt the economy.”
All forms of Brexit will have a negative impact on the economy, compared to remaining within the 27-member trading bloc, according to the government’s own analysis, which was published the same day as the bank’s report.
Epoch Times reporter Simon Veazey contributed to this article.