Forecasters from the Bank of England (BoE) to the Organisations for Economic Co-operation and Development (OECD) continue to believe the outlook for the UK economy looks gloomy.
According to the latest CIPS/Markit PMI data, there has been a slowdown in growth within UK manufacturing and a rise in association with the weak pound.
It’s widely anticipated that the Bank of England’s Monetary Policy Committee (MPC) are likely to raise interest rates in November. After voting unanimously against raising interest rates for the last several quarters, the committee was split (6-2) for the first time in August.
Groundwork has been set for a raise in interest rates before Christmas, with the bank saying “Some withdrawal of monetary stimulus is likely to be appropriate over the coming months”. The bank is under pressure to bring inflation back down to their target rate of 2% (3% at the time of writing), and ease consumer spending worries.
The shadow of Brexit continues to hang over the UK economic outlook, with the OECD reporting in October, that a new referendum or a change of government policy to remain inside the EU would have a “significant” impact on UK growth. Whilst they agreed the outcomes of the Brexit negotiations would be hard to predict, they also warned that if UK negotiators end up in the “no deal” position, that investment would likely seize up, the pound would sink to a new low and the UK would face having its credit rating cut.
Dutch giant ING are linking the two and expect that a continuing deadlock in negotiations with the EU could see the BoE forego any planned rate rise in November. The logic is that the BoE have repeatedly made it clear that their forecasts have been based on Brexit negotiations proceeding smoothly. Since that prediction is looking increasingly uncertain, it’s possible the bank will proceed with caution until the picture becomes clearer.
Either way, the increasing uncertainty will play havoc with organisations’ ability to plan. Business leaders have indicated that should talks not make progress before Christmas, plans will have to be made on the basis of “no deal”.
It’s not all doom and gloom though, according to Deloitte’s Q3 survey of UK CFO’s, uncertainty levels have dropped and optimism about financial prospects has grown. The CFO’s also report that the appetite for risk remains below average and that they remain on a defensive footing, with Brexit still cited as the main reason.
Whatever happens, we cannot predict the future. Continued uncertainty means it makes sense to ensure your overhead costs have been thoroughly assessed, in order to ensure that you are operating as efficiently as possible. Our expert help can maximise your fighting fund, by optimising quality and service from suppliers and eliminating overspend.
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