A leading businessman this week spoke about a recent meeting with a big Canadian pension fund looking for overseas infrastructure projects in which to invest. Britain was out of the running because of uncertainty about the European Union referendum.
For the fund, it was not a problem. There were ample opportunities elsewhere. For the UK, it was a missed opportunity.
Brexit fears are taking a toll. The composite purchasing managers’ index for April indicated that growth in the three months to June may be just 0.1 per cent, down from 0.4 per cent in the first quarter. Barclays has cut its forecast to zero. The UK is on track for the weakest growth since 2012.
Manufacturing will shrink even faster, the PMIs showed. Construction and services slumped to three-year lows. Hiring intentions have not been so weak since 2013. New orders hit a wall in manufacturing and construction. Optimism in the services sector slumped to the 33-month low seen in January.
“April saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases,” Chris Williamson, chief economist of Markit, said. Like the Canadian pension fund, businesses have decided to wait and see.
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Delaying decisions is rational for companies but the surprise has been among consumers, where confidence has collapsed into negative territory for the first time in 15 months.
George Osborne may have contributed with his warnings about the cost to families of Brexit but there is a sense that the referendum may be handy cover for a more general malaise.
Shinzo Abe, the Japanese prime minister, warned yesterday that “downside risks and vulnerability in the global economy are increasing”. In Britain manufacturing has been declining for four of the last five quarters, a trend also visible in Chinese and US industrial sectors. America posted GDP growth of just 0.1 per cent in the first quarter. Last month, the IMF demanded coordinated action to avoid a low-growth trap.
Domestically, this week’s bad news was also linked to the national living wage, as business blamed higher pay for the reduction in new recruits. Activity in the services sector, which accounts for four fifths of national output, has been on a downward trend for a year now.
That decline has accompanied a fall in average weekly earnings growth, which peaked last May at 3.3 per cent and has slumped to 1.8 per cent. Households are putting less aside in savings than ever.
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Brexit is clearly a factor but there are other reasons to worry about the slowing economy.