UK: Brexit uncertainty suppresses business investment – Rabobank
|Research Team at Rabobank, notes that the Office for National Statistics (ONS) confirmed that UK GDP grew by 0.4% in the first quarter of 2016.
Key Quotes
“Growth in household consumption (0.7% q-o-q) and household investment (1.4% q-o-q) underline the importance of household spending. Strong domestic demand has also translated into high import growth (0.8% q-o-q). Because exports shrank by 0.3% q-o-q, net trade subtracted 0.4%-points of economic growth.
Notable was the second consecutive decline in business investment by 0.4% q-o-q in 16Q1, after the large 2% q-o-q decline in the last quarter of 2015. The high level of uncertainty about the outcome of the EU referendum and the expected negative impact of a Brexit probably explains these developments.
Companies postpone investments until there is more certainty about the future of British free trade and the economic outlook. This is also visible in the drop of investment intentions of companies in the manufacturing sector and services sector. Because we expect that the British people will vote in favour of EU membership, we expect that business investment will rebound in the second half of 2016. This will give a strong, but temporary, boost to the UK economy. A vote in favour of Brexit will likely suppress business investment in the next two years.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.