The Brexit bandwagon continues to roll on for now, with a deadline date of March 29th now barely six weeks away. At present, MPs are debating on the next potential steps in the Brexit process, as the prospect of no-deal exit increases with every passing day.
While there’s plenty of speculation about how a no-deal Brexit would impact on the UK economy, the uncertainty surrounding our exit from the European Union is already damaging business growth nationwide.
The evidence suggests that that Brexit has certainly had an impact on business investment in the UK. We’ll explore this further below, while asking how it’s affecting company spending across a range of sectors.
Has Investment Increased or Fallen Recently?
Overall, business investment declined again during the second quarter of 2018, with Brexit uncertainty cited as the primary reason for this.
According to the Office for National Statistics (ONS), it’s estimated that investment by firms fell by 0.7% in the three months to June 2018, following a similarly sharp contraction of 0.5% in the first quarter.
This coincided with findings from the Bank of England (BoE), which revealed that firms are actively putting investment on hold (or diverting it abroad in the case of multinational companies like Sony and Panasonic).
Driven by economic uncertainty and fears about the UK’s future trade relationship with the EU, this trend is likely to continue for as long as a no-deal exit remains on the card.
However, the BoE governor Mark Carney and financial advisors like Downing believe that investment could rebound if a withdrawal deal is struck, as this will instantly help the UK to retain its single market access.
What About International Investment?
These figures contrast sharply with the amount of capital being sunk into the UK from overseas, as foreign companies look to either eschew or capitalise on the Brexit fall-out.
In fact, overseas investment levels in the UK rose their highest level last year, with the value of foreign direct investment (FDI) stocks peaking at £1,336.5 billion.
Most of this investment came from developing economies like China and India, with contributions from the latter nation showcasing a staggering 321% increase on the previous years’ figures.
While this may be seen as a cause for celebration in some instances, there are two key things to keep in mind. Firstly, some investors may be looking to leverage the weakness in the pound in order to achieve a profit at a later date, with this strategy particularly relevant to commercial property investments from overseas.
Secondly, some of these investments may have been made in the belief that the UK would strike a favourable withdrawal agreement with the EU, and it will be interesting to see if these volumes as a no-deal Brexit looms large on the horizon.