Shockwaves from Britain’s vote to leave the European Union rocked the economy on Thursday, with thousands of jobs lost at one of the country’s biggest banks, consumer confidence plunging, and construction and car sales slowing.
Preparing for a Brexit-related slowdown, Lloyds Banking Group said it would cut a further 3,000 jobs and one of Britain’s biggest car dealerships, Inchcape, predicted growth in new car registrations would fall.
“The public are still absorbing the EU referendum result but it is clear that consumer confidence has taken a significant and clear dive,” said Stephen Harmston of the YouGov polling organisation.
A month after the referendum, the latest signs of an economic slowdown are likely to fuel expectations of action by the Bank of England on Aug. 4, when many economists believe it will cut interest rates and might start buying bonds again to pump money into the financial system.
Lloyds, Britain’s largest retail bank, said it aims to save 400 million pounds by the end of 2017 by axing the jobs – on top of 4,000 positions it has already said it would cut from its 75,000-strong workforce – and by closing an additional 200 branches.
“Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely,” it said.
The economy grew fairly robustly in the run-up to the vote but economists expect businesses and consumers to cut back after the referendum shock, although a dive in the pound has helped some companies which make most of their earnings aboard.
Rolls-Royce shares rose sharply after it forecast profits would improve in the second half of the year, helped by a pick-up in deliveries of large aero engines.
Drinks group Diageo, reporting higher sales, said it had not so far seen any impact from Brexit. The company is the world’s biggest maker of Scotch whisky, which is mostly exported and would benefit from sterling’s weakness.
Another winner was Merlin Entertainments, which runs tourist attractions such as Madame Tussauds waxworks and Legoland and expects to benefit from the lower pound attracting more foreign visitors to its British sites.
But travel company Thomas Cook cut its profit target as the weak pound, together with attacks in Europe and a failed coup in Turkey forced British customers to change their holiday plans.
An index of British consumer confidence plunged nearly five points to 106.6 in July – matching its biggest fall in six years and hitting its lowest level since 2013, polling firm YouGov and the Centre for Economics and Business Research (CEBR) said.
People are particularly worried about what will happen to the value of their homes, the survey found.
The European Commission’s consumer confidence gauge for Britain suffered its biggest monthly drop in July since January 1991, hitting its lowest level since June 2013.
House price growth edged up in July but the data might not yet reflect any impact from the referendum because of a lag, mortgage lender Nationwide said.
Britain’s biggest lettings and estate agency company, Countrywide Plc, issued a profit warning, saying that commercial and London residential transactions had stalled after the Brexit vote.
Economists say spending by consumers offers the best hope that Britain can avoid a Brexit-related recession. But retailers said sales fell sharply after the referendum, according to a survey published on Wednesday.
French advertising company JCDecaux said it would reduce investments in Britain, citing uncertainty about the Brexit impact on the economy and advertising revenues.
BUILDERS, RETAILERS UNDER COSH
In construction, growth in activity slowed after the vote, the Royal Institution of Chartered Surveyors said.
Contributors to a RICS survey predicted a 1 percent rise in workloads over the next 12 months, down from growth of 2.8 percent that they had foreseen in the first quarter.
Britain’s property market has been one of the worst hit sectors since the referendum with shares in housebuilders plunging while investors pulled out cash from commercial funds, forcing many to be suspended.
Construction firms cut back their forecasts for hiring, mirroring moves by British retailers who reported the fastest fall in full-time equivalent employment in two years in the second quarter, as the referendum approached.
But a survey by the British Retail Consortium showed 93 percent of retailers intended to keep staffing levels unchanged in the next three months, compared with 83 percent in the second quarter of last year.
A third survey published on Thursday showed pay awards in Britain stuck in a slow gear.
Median pay settlements in the three months to the end of June were worth 1.8 percent for a third month in a row, after a two-year run when increases of 2 percent had become normal, according to XpertHR, an online human resources firm.
“It remains to be seen how the uncertainty around the impact of the Brexit vote will feed through to pay settlements, but we are likely to see pay awards remaining subdued for many months to come,” XpertHR’s Sheila Attwood said.
In a boost for the British government’s drive to encourage investment post-Brexit, French state-owned utility EDF was expected to give the go-ahead later on Thursday to an 18 billion pound nuclear power project in southwest England.
Source: Reuters (Additional reporting by Andrew MacAskill and Lawrence White, writing by Giles Elgood,; editing by William Schomberg, Guy Faulconbridge and David Stamp)