Brexit "lowering productivity growth" as Moody's downgrades UK credit rating

Moody's said the drivers for cutting the credit rating were weakening public finances amid pressure to raise public spending, and an "erosion of economic strength" due to Brexit.

A similar picture is painted by the results of the Bank of England's decision makers panel (8 page / 627KB PDF)– a group of 2,500 chief executive officers who respond to a monthly survey run by the Bank of England together with Nottingham University and Stanford University in the US since August 2016.

In the August 2017 survey around 40% of respondents cited Brexit as at least one of the top two or three sources of uncertainty facing their business. Levels of uncertainty had risen since September 2016.

With a year of data now collected, the survey shows continued pessimism among business leaders as to what the future might hold. Although 27% of respondents saw average revenue growth of more than 15% in the second quarter of 2017 – the highest proportion in the last four quarters, with average growth of 7.6% - the outlook was more pessimistic. Companies' expectations for sales growth have dropped since the third quarter of 2016 from 6.4% to 5.3%.

Just over a third of the panel said Brexit would make little difference to their sales, but 43% of respondents said it would have a negative impact.

According to lead researcher Paul Mizen from Nottingham University's school of economics, Brexit had so far not led to the "sharp downturn" in investment and growth predicted after the vote to leave the EU.

However Mizen said in the long term Brexit could lower aggregate productivity growth.

The survey also showed that 21% respondents thought there was at least a small probability they would move some of their operations abroad as a result of Brexit.

Guy Lougher, head of the Brexit taskforce at Pinsent Masons, the law firm behind Out-Law.com, said the survey was further proof of the impact of Brexit for businesses.

"The survey indicates the increasing extent to which Brexit features as an ongoing significant issue amongst the business community.  This is unlikely to change for some considerable time," Lougher said.

A series of reports and surveys have found that business confidence has been low since the Brexit vote with an impact expected for both small and large companies. Many have called for a transitional period maintaining the status quo of the UK's membership of the single market and last week prime minister Theresa May, speaking in Florence, backed a "strictly time-limited" period to provide more certainty as the withdrawal took place.