U.K. business sentiment drops to lowest level in four years on increased economic uncertainty

U.K’s business sentiment, which is based on companies’ projections for their sales, profits and orders in the coming six months dropped from 38 percent in January to 12 percent, the lowest level in four years. However, it remained quite above the low level recorded during the global financial crisis.

The latest results of the survey hint at the possibility of a slowdown; however not necessarily a sharp contraction in the nation’s economic growth. The survey was carried out in mid-July, before  the Bank of England’s policy stimulus announcement; however, a drop in interest rates was expected to majority of the survey respondents, said Lloyds Bank in a research note.

Prospects of export of the U.K. have softened, especially with Asia and Europe. Most of the firms have shown that the current value of the British pound against the US dollar is favorable, while views on the euro exchange rate were balanced evenly, noted Lloyds Bank.

Meanwhile, outlook for capital spending and hiring have eased. The decline to marginal negative territory in the net balance of companies anticipating to raise their staff numbers might hint at a slowdown in employment growth, whereas increased economic uncertainty is likely to be a drag on investment in the country.

The proportion of companies reporting challenges in hiring skilled labours have dropped to a two-year low of 38 percent, in line with a drop in the share anticipating average pay to increase in the coming six months. The prospects for general prices and profits have also weakened, added Lloyds Bank.

The decline in business sentiment was seen throughout all sectors, especially in the service sectors such as hospitality and leisure, retail and wholesale and business and other services. Confidence also decline in manufacturing in spite of pound’s weakness that might show general weakness in domestic and global demand conditions.

Region wise, the confidence was varied and might have been impacted by the Brexit vote outcome. Scotland and London recorded the lowest sentiment levels. These regions had voted for ‘Remain’. Meanwhile, Yorkshire and Wales registered highest levels of confidence.