British businesses grew at the slowest rate in nearly six years last month because of fears of a no-deal Brexit and rising global trade barriers, according to a survey by the Confederation of British Industry.
The CBI’s measure of private sector growth dropped to -3 in February from zero in January.
This was its lowest reading since April 2013, fuelling concerns that Britain’s private sector has been shrinking in the run-up to the scheduled Brexit leave date of 29 March. Firms warned that the outlook for the next three months was even bleaker as the battle between the US and China over import tariffs harmed global trade.
Manufacturing, which according to official figures is in recession, was among the worst affected parts of the economy, although it was a sharp slowdown in the usually robust services sector that accelerated the drag on growth in the three months to February.
The CBI said its growth indicator showed that private sector businesses were under pressure from squeezed household earnings and the prospect of a no-deal Brexit, which deterred business investment.
“More and more companies are hitting the brakes on investment and day-to-day business decisions are becoming increasingly problematic,” the CBI’s chief economist, Rain Newton-Smith, said.
A survey last week showed manufacturers increased their stockpile of raw materials and finished goods by the most since records began in 1992 as they prepared for the possibility of border delays after Brexit.
“Until politicians can agree a deal that commands a majority in Parliament and protects our economy, growth will continue to suffer and long-term damage will be done,” Newton Smith said.
Economists have become increasingly concerned that households maintained their spending last year by dipping into their savings and through extra borrowing. Businesses, meanwhile, cut investment by 3.7% in 2018 at a time when most developed economies enjoyed a boost to investment.
The Bank of England predicts Britain’s economy will grow by only 0.2% in the three months to March. A vote in parliament for a deal with the EU that includes a transition period to a new trade arrangement will still leave growth at its lowest rate since 2009, the central bank said.
The CBI survey was based on responses from 650 businesses in retail, manufacturing and services.