The economic fallout from the UK’s vote to leave the European Union might not actually be having as huge of an impact on the British economy as first expected, according to a new report from the Bank of England.
The BOE released its July “Agents’ summary of business conditions” — a monthly review of what businesses in the UK are up to and their expectations for the future are — on Wednesday, and the findings are slightly better than might have been expected following the referendum.
In the summary of its Agents’ survey, the BOE argues that its research showed that: “As yet, there was no clear evidence of a sharp general slowing in activity.”
Warnings have abounded that as soon as Britain voted to leave the EU, business conditions would suffer massively with investment and activity slowing drastically, however the central bank’s assessment seems to suggest that while there is going to be an obvious hit to the UK’s economy, it has yet to manifest itself so far.
Things may not be as bad as some might have expected in the month since the vote, but the BOE notes that there have been some negative consequences since the referendum result. Here is an extract from the survey:
“Following the EU referendum, business uncertainty had risen markedly. Many firms had only just begun to formulate new business strategies in response to the vote and, for the time being, were seeking to maintain ‘business as usual’. A majority of firms spoken with did not expect a near-term impact from the result on their investment or staff hiring plans. But around a third of contacts thought there would be some negative impact on those plans over the next twelve months.”
Last week, the BOE shocked the markets and many economic commentators by leaving interest rates on hold for an 88th consecutive month. A rate cut from 0.5% to 0.25% was widely expected but did not materialise.
At the time of the release on Thursday, the Bank pretty much telegraphed a rate cut at its next meeting in early August, saying: “The MPC is committed to taking whatever action is needed to support growth and to return inflation to the target over an appropriate horizon. To that end, most members of the Committee expect monetary policy to be loosened in August.”