U.K. Confidence Slips in June as Economic Pessimism Mounts
Brexit, global trade tensions makes U.K more pessimistic about the economic output.
(Bloomberg) -- U.K. confidence took a turn for the worse in June as businesses and consumers became more pessimistic on the economic outlook.
Business optimism dropped to the lowest level this year, Lloyds Bank said in a report published Friday. The decline was driven by concerns about the strength of the wider economy, with Lloyds highlighting Brexit and increasing global trade tensions as particular areas of worry.
A separate survey from GfK showed an index of consumer confidence fell two points to minus 9, with Britons declaring themselves markedly more gloomy and unwilling to make major purchases. All five scores that make up the index declined.
“Consumers are yet again feeling less upbeat,” said Joe Staton client strategy director at GfK. “Shoppers are holding on to their cash and consumers in general seem set on their path of self-imposed austerity.”
The reports come as British retailers continue to struggle against the rise of online shopping and squeezed incomes in the wake of the Brexit vote. The owner of John Lewis department stores and Waitrose supermarkets became the latest casualty this week, warning that its first-half profit will be close to zero.
Higher Rates
Worse could be to come for some businesses, as signs of inflationary pressure in the labor market have Bank of England officials considering when to raise interest rates from their current level of 0.5 percent. More than 60 percent of companies in the Lloyds survey expect the central bank to hike this year to 0.75 percent, with about a fifth saying rates of 1 percent would have a negative effect on their business.
A separate report Friday from the Confederation of British Industry showed growth in the private sector slowed slightly in the second quarter compared with the three months through May, with the biggest drag coming from business and professional services.
BOE officials say they expect growth to bounce back in the second quarter, and the near-stagnation in the opening three months of the year to be revised higher. The Office for National Statistics will released its final estimate for first quarter growth later Friday.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Andrew Atkinson, Zoe Schneeweiss
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