Written by: Keith Tully
Reviewed: Monday 6th June, 2016
Uncertainty created by the upcoming referendum on UK membership of the European Union has dragged down the level of ordering activity among British businesses in recent months.
That’s according to the latest BDO Monthly Business Trends survey, which suggests that orders among UK companies fell to a near-three-year low in May.
Having fallen from 100.6 to 99.7 last month, BDO’s output index now sits below the long-term average and at its lowest position since September 2013.
The fall recorded in May of this year was the 10th such monthly decline in succession.
“The slowdown in activity is linked to uncertainty surrounding the referendum on EU membership,” the business trends survey report makes clear.
Expectations among the compilers of the trends report are that a vote by the British public to remain part of the EU will see ordering trends among British firms rebound, while the short-term consequences of a vote to leave is expected to be “a deeper slowdown”.
However, the longer-term consequences of a so-called ‘Brexit’ from the EU are described by BDO’s experts as being “much more debatable”.
Uncertainty around the referendum on EU membership is also blamed in part for a drop in BDO’s employment index for the month of May.
“Many firms are delaying hiring decisions until after the referendum on EU membership,” the report says.
Although, broader concerns about the strength of the British economy and the impact of the introduction of the National Minimum Wage in recent weeks were also cited as important factors holding back hiring around the country last month.
Another point raised in the June 2016 business trends report is that manufacturing companies continue to demonstrate the lowest levels of confidence of any industry sector within the UK economy, with “overcapacity and weak demand on a global level” cited as the key reasons why this is currently the case.
UK citizens will take to the polls to determine the future of Britain’s relationship with the European Union during the referendum on June 23rd 2016, with business leaders apparently as divided as the rest of the population about which course represents the best route forward for the nation and the economy.