Business leaders have stated that the country could be talking itself into another recession following the decision to leave the EU.
East Midlands Chamber of commerce has made the warning following a number of recent reports citing Brexit as the primary cause of failing business confidence and, in one case, a significant fall in corporate profits in the second quarter – of which only one week was post-EU Referendum.
The National Institute of Economic and Social Research (NIESR) called on the Bank of England’s Monetary Policy Committee to cut the base interest rate from 0.5 per cent to 0.25 per cent with a view to dropping it to 0.1 per cent later in the year.
It also called on the Government to cut taxes and increase spending to avoid economic growth falling to only one per cent next year.
Scott Knowles, chief executive of East Midlands Chamber, said: “The chamber has been neutral on Brexit throughout, but we believe that the messages being given to the global business community at the moment are all wrong.
“Until Article 50 is triggered we remain part of the EU, with all that it entails, and nothing changes. Even after Article 50 is triggered nothing is going to change overnight and probably not for several years.
“GDP for the second quarter of 2016 was up on the first quarter despite the uncertainty of the EU Referendum. It was up 2.2 per cent year-on- year and up 7.7 per cent compared with 2008. High Street sales for the second quarter were up on the first quarter and year-on- year. And despite its warnings of ‘technical recession’ in 2017, even the NIESR has said export sales have increased as a result of the weaker pound.
“Chambers across England, Wales and Northern Ireland, carried out a snapshot survey of members and found that, by and large, confidence remains high, with over half of the respondents saying they thought leaving the EU would bring no change or positive change to their business and over half of businesses saying they have not revised their recruitment or investment plans or have no intention of doing so. In the East Midlands businesses were split roughly 50:50 over future growth prospects.
“There was a lot of pressure on the Bank of England to cut the base rate from 0.5 per cent to 0.25 per cent last month. It resisted, thereby sending a message to the world that it had confidence in UK plc. We would urge the Monetary Policy Committee to make only cautious moves.”