London: British households grew more downbeat about their finances this month as job worries rose to the highest in over a year, reflecting a slowing economy and uncertain prospects for Brexit in less than six weeks’ time.
Consumer spending and a strong labour market were a relative bright spot as Britain’s economy slowed last year to record its weakest growth since 2012, but since late last year there have been growing signs that Brexit uncertainty is taking a toll.
IHS Markit’s Household Finance Index dropped to its lowest since March, with a component reflecting job security dropping to its lowest since January 2018, despite official figures that show unemployment at its lowest since the mid-1970s.
“The impact on confidence caused by Brexit uncertainty continues to pose a notable risk to the domestic economy, also highlighted by job security perceptions becoming increasingly negative in February,” IHS Markit economist Joe Hayes said.
Official data due on Tuesday is forecast to show the fastest wage growth since 2008, according to a Reuters poll, and a survey of businesses released earlier on Monday showed they planned to raise wages by the most in at least seven years.
But Britain remains at risk of leaving the European Union on March 29 without any transition deal to maintain existing trade arrangements, unless Prime Minister Theresa May can persuade parliament to accept Brussels’ terms or delays departure.
The Bank of England predicts growth will slow this year to its weakest since 2009 even if Brexit goes smoothly, due to heightened global trade tensions and ongoing uncertainty about Britain’s long-term ties with the European Union.
BoE Governor Mark Carney has said interest rates could move either way in the case of a no-deal Brexit — which would likely send the pound tumbling as well as dealing a major blow to growth.
But Monday’s survey showed that the proportion of Britons expecting the BoE’s next rate move to be a cut rose to its highest since December 2016 at 13 per cent.
The proportion expecting a rise within the next six months dropped to 46 per cent, the lowest since June 2018.