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Brexit, Europe

UK business conditions in the aftermath of Brexit vote

Hereafter is the Bank of England’s assessment of business conditions in the UK. This update generally covers business conditions in the month preceding the EU referendum, but also provides a summary of intelligence gathered following the vote to leave the EU.

Annual growth in consumer spending had eased slightly during the month up to the referendum, with a slowing in demand growth for larger value household goods and for hotel stays.

Business services turnover growth had remained modest. There were further reports of clients delaying major business decisions ahead of the EU referendum.

Growth in manufacturing output for the domestic market had increased, with output modestly higher than a year earlier. The annual rate of contraction of manufacturing exports had moderated slightly further.

Construction output growth had eased a little, remaining moderate. Investment intentions for the year ahead were little changed and pointed to modest growth in investment. There were some reports of delays in decision-taking on corporate spending until after the EU referendum.

Bank credit availability had improved a little across all sizes of company, largely reflecting increased competition. Businesses’ demand for credit had remained subdued.

Investor demand for commercial real estate had continued to decline, largely reflecting a deferral of decisions until after the EU referendum. Occupier demand growth had been steady.

Housing market activity had remained subdued and lower than a year earlier.

Capacity utilisation was slightly above normal in services and below normal in the manufacturing sector.

Employment growth intentions had slowed a little further, partly reflecting deferrals of some recruitment decisions prior to the EU referendum. Recruitment difficulties had eased, though remained above normal.

Growth in labour costs per employee had edged lower, largely reflecting some reduction in bonus and commission payments as activity growth had eased over recent months.

The annual rate of decline of materials costs had eased further and imported finished goods price inflation had edged up.

Manufacturing output price inflation had remained modestly negative and business services price inflation modestly positive.

Consumer price inflation had edged slightly higher, with the annual rate of decline in goods prices having eased a little further as the decrease in sterling since late 2015 started to be reflected in some prices, such as fuel.

Services price inflation had remained moderate.

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