Brexit Vote hits UK households and business morale, London hurt most

By Updated at 2016-07-11 10:14:48 +0000


British consumer spending fell last month, the business outlook darkened by the most in four years and economic activity in London slowed sharply, according to three reports which showed the vote to leave the European Union starting to take a toll.

Figures for June from card company Visa, Lloyds Bank and financial data provider Markit pointed to nervousness among businesses and households in the run-up to the June 23 Brexit referendum and in the days immediately after.

Visa said consumer spending dropped for the second month in a row in June, down by 0.5 percent to leave overall purchases up just 1.4 percent on the year in the three months to June, the weakest inflation-adjusted growth since early 2014.

Markit said businesses had the least positive economic outlook in four years, based on responses collected between June 13 and June 29, with many firms blaming the referendum.

"The survey saw widespread concerns that a 'Brexit' vote will lead to prolonged uncertainty -- both politically and economically -- the loss of business to key European markets, and a potential recession in the UK," Markit said.

Most of the responses came before the outcome of the vote was known, suggesting a further deterioration is possible.

The Bank of England, which meets to set interest rates this week, expects the economy to suffer a material slowdown because of the uncertainty caused by the vote to leave the EU.

On Friday, a survey of consumer morale by market research company GfK showed one of its biggest falls in more than 20 years.

Visa said consumers were cutting back on discretionary spending, such as hotels, restaurants and bars, as well as new cars and foreign travel.

"With the (referendum) result coming late in the month, this report doesn't give the full picture, but there's a clear trend over recent months showing a slowdown in overall growth," Visa's UK managing director Kevin Jenkins said.

Visa did not break out separate figures for the last week of the month but said consumer spending looked set to be "muted at best" for the rest of the year.

London, where a majority of voters favored staying in the EU, looks set to take a big hit.

Lloyds Bank's monthly survey of regional economic activity showed the capital last month suffered its biggest contraction since the depths of the financial crisis in April 2009, dragging down average growth for England and Wales as a whole.

"The increased uncertainty in the period leading up to the EU referendum naturally led businesses to be cautious. Following the outcome of the referendum it is still too early to understand the full impact," said Tim Hinton, Lloyds' managing director for small and medium-sized business lending.

(Editing by Catherine Evans)