U.K. consumer and business confidence was muted in February as Brexit obscured prospects for economic growth.
GfK said its measure of household sentiment slipped this month, with consumers less willing to splash out and feeling less optimistic about the economy. A separate report on Wednesday by the Recruitment and Employment Confederation showed that confidence in hiring and investment decisions has fallen to the lowest since the referendum to leave the European Union in 2016.
Uncertainty about Britain’s future trading relationship with the EU is weighing on investment and job growth even as a faster global expansion brightens the outlook for trade. The Brexit vote’s impact on the pound is still being felt as the weaker currency keeps the inflation rate high and diminishes shoppers’ purchasing power.
“Consumers feel pessimistic about the state of household finances and the wider U.K. economy,” said Joe Staton, head of experience innovation at GfK. “Despite positive news about upgraded growth forecasts, and the promise of higher wage increases this year, confidence will remain subdued until we feel the positive impact on our purses.”
A separate measure by the Centre for Economics and Business Research and YouGov showed that while consumer confidence rose a bit this month, it’s still well below pre-referendum levels.
There are also signs that uncertainty has caused some companies to retrench, even with the stronger global backdrop. Payments firm WorldFirst said the percentage of small and medium-sized businesses trading internationally halved in 2017.
Some measures point to optimism, however. A Lloyds Bank report showed businesses’ confidence in the economy remained solid in February, and overall sentiment so far this year is higher than in the fourth quarter.
With businesses seeking clarity, the outlook hangs largely on the negotiations between Prime Minister Theresa May’s government with the EU. After an initial deal in December, the prospect of a battle over Britain’s post-Brexit transition period is looming, meaning the U.K. is at risk of missing a crucial end-March deadline for an agreement.