Britain’s leading employers’ organisation has urged the government to end Brexit uncertainty after warning that the deadlocked talks have already led to plunging investment, waning business confidence and the sharpest fall in order books in three years.
In its latest quarterly health check, the CBI said the impasse in the talks between London and Brussels would bring growth in manufacturing output to a standstill over the coming month.
The CBI has been at the forefront of business demands for a speedy resolution to the Brexit negotiations and a deal that ensures future access to the UK’s main export market, the EU.
Its industrial trends survey showed that output had held up well over the past three months but was now expected to falter as order books dried up.
The CBI said its measure of business optimism had fallen from -3 to -16 in the past three months, the fastest rate of decline since the immediate aftermath of the EU referendum in June 2016.
Concerns that political and economic conditions were likely to limit export orders over the next three months were also at their highest since the survey was conducted in July 2016, an indication that firms are worried about future trade barriers.
Rain Newton-Smith, the CBI’s chief economist, said: “This is a sobering set of figures demanding immediate action at home and abroad.
“Planned investment is being scaled back in the face of deepening Brexit uncertainty, so it’s vital that the chancellor incentivises manufacturers to spend in areas that will help them become more productive. Using the upcoming budget to increase the annual investment allowance, alongside a wider review, could help the UK become more competitive with its global peers.”
The survey showed that investment intentions for the year ahead have deteriorated sharply in the past three months, with firms expecting to cut back spending on buildings, training and innovation. Capital expenditure on plant and machinery is set to be reduced at the fastest pace since July 2009.
The CBI said firms were also worried that a lack of skilled labour would affect their future plans. Concerns that access to skilled labour would limit output over the quarter ahead rose to the highest in more than 40 years.
Newton-Smith said: “Aside from much-need progress on domestic policy, the government’s number one priority on Brexit must be securing the withdrawal agreement, ushering in a much-needed transition period that will give businesses the breathing space they need. Protecting jobs and people’s livelihoods from a lost generation of investment remains urgent.”
