Chancellor to make morning statement to reassure markets as survey reveals negative business impact of EU vote
British businesses have warned that Brexit will trigger investment cuts, hiring freezes and redundancies as the consequences of leaving the European Union threaten to destabilise markets further this week.
The survey by the Institute of Directors (IoD), which found that the majority of businesses believed Brexit was bad for them, comes amid fears that investors will wipe billions more pounds off share values on Monday morning, and signs that the pound, which hit a 30-year low on Friday, was coming under further pressure from trading in Asia. Sterling was down more than 1% as the Asian markets opened late on Sunday.
George Osborne will make a statement on Monday morning to provide reassurance about financial and economic stability in light of the referendum result and the actions that he and the rest of the government will be taking to protect the national interest over the coming period.
The IoD said a quarter of the members polled in a survey were putting hiring plans on hold, while 5% said they were set to make workers redundant. Nearly two-thirds of those polled said the outcome of the referendum was negative for their business. One in five respondents, out of a poll of more than 1,000 business leaders, were considering moving some of their operations outside of the UK.
In preparation for further turmoil on the markets after a record $2tn (1.5tn) was wiped off global share prices on Friday, the governor of the Bank of England, Mark Carney, was expected to abandon plans to travel to a meeting of central bankers and policy makers organised by the European Central Bank in Portugal on Wednesday. He will remain in London to oversee the response to the uncertainty.
The FTSE 100 index of leading shares is expected to fall by 2.8%, or around 180 points, when the market opens on Monday. City dealers are expected to arrive at their desks early to cope with an anticipated surge in orders, and analysts will be closely monitoring the pound, after it came under pressure in early trading on Sunday. Central bank bosses meeting in Switzerland have said they will carefully scrutinise market stability in the weeks ahead.
The political uncertainty gripping the UK following the resignation of prime minister David Cameron and turmoil in the Labour party has put the City on alert for more volatility. With fears that the economic turmoil following the result will tip the country into recession, the snap poll of IoD members found that company bosses were considering a range of options, including hiring and investment freezes and relocating some of their operations.
Simon Walker, the IoDs director general, said the organisation would not sugar-coat the damaging outcome: A majority of business leaders think the vote for Brexit is bad for them.
Businesses will be busy working out how they are going to adapt and succeed after the referendum result, said Walker of the group which has 34,500 members, ranging from start-up entrepreneurs to chief executives of multinational companies. But we cant sugar-coat this, many of our members are feeling anxious.
In the poll, 36% of IoD members said the outcome of last Thursdays vote would lead them to cut investment in their business whereas just 9% said the opposite was true. Just under half said it would not change their investment plans.
The IoD board and its council, which is a conduit for members views, will meet on Monday to discuss the fallout from the vote. Three-quarters of members polled said they felt the priority for business leaders was to take steps to protect the economy from the negative reaction in financial markets, with securing a new trade arrangement with the EU coming second to that. Business lobby group the CBI has also said it was speaking to its members as the UK stared at several years of economic uncertainty.
There is no point crying over spilled milk, said Walker. But these results highlight the importance of the Bank of England maintaining stability in the financial system. It is crucial that the banks do not starve businesses of cash. During the referendum campaign we were promised an open and outward-looking country after Brexit, now it must be delivered [by David Camerons successor].