Post-Brexit economic uncertainty will cause companies to spend less on hiring and investment over the course of the next year, according to credit ratings agency Moody’s.
Moody’s said investment would “weaken considerably” through to the end of 2017 the Press Association cited the report as saying.
“Uncertainty around the future of the economy outside the common market will continue to dampen business investment and consumer spending, as businesses hold back on hiring and making long-term investments, and as consumers postpone large spending decisions,” The Telegraph quoted senior analyst Madhavi Bokil as saying.
Moody’s reiterated its previous estimates for UK economic output to grow by 1.5% this year and 1.2% in 2017. The firm said that the sharp fall in sterling, which has plunged below $1.30 since the June EU referendum vote, will help balance the short-term negative impact by boosting exports.
The report echoes research from the Resolution Foundation earlier this week. The think-tank found that reducing immigration will result in a small pay rise for certain jobs, but the negative economic hit to wages from Brexit will be between five and 10 times greater.
Reducing net immigration to the government target of 99,000 from current levels of 330,000 could increase wages by up to 0.6% by 2018, the Resolution Foundation said in a report on Tuesday. But this will be more than offset by the economic dampening effect of Brexit, which the Bank of England said would produce a fall in real income of about 2% in the same period.
The UK economy is set to underperform because businesses will look elsewhere to recruit cheap staff and scale back their Britain-based operations, rather than eat the higher employment costs.
“If businesses find it impossible to recruit more natives or reduce demand for labour then it is likely that many will reduce output in the UK,” the Resolution Foundation said.
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