Britain’s businesses need answers, and they need them fast, World First’s Jeremy Cook warns in his latest round-up of the month’s foreign exchange news.
As we approach August all eyes are on the Bank of England governor, Mark Carney, who will give his quarterly update on the state of the economy on the 4th. What he says and does, will give us the clearest insight yet on the effect the Brexit vote is having on the economy.
We know already that confidence, investment and jobs have been hit. But we haven’t had much structured data. Carney will have the most up-to-date research, which will enable him to tell us how big that hit is and how long it is likely to endure.
He will also give us a clearer sense of what the Bank intends to do to reduce the economic damage caused by the vote. This could include: cutting interest rates to possibly 0%, an increase in quantitative easing spending by as much as £100bn or even £150bn, and further lending to businesses at very, very low rates, with loans guaranteed by the Treasury.
The short-term economic signs we’re seeing are not good. We know from talking to our clients that the vast majority – as many as four-fifths – are trimming investment: reducing capital spending, and are worried about the jobs outlook. That’s in line with surveys of all business of all sizes nationwide.
Once Mark Carney has reported, attention will quickly shift back to the new government. Brexit is a political phenomenon with an economic side-effect, not the other way around.
Theresa May’s appointment as prime minister has steadied the political ship and calmed the markets a little. What direction she sails in and how smooth the sailing is, as she and her Brexit team cross the Channel to negotiate a settlement with EU officials, is crucial.
Brexit means Brexit, as May says. But it’s not a black and white question. There are dozens, if not hundreds of shades of grey in between. We need answers to five questions – and the sooner we get those answers, the sooner businesses can get back to planning for the future, investing, and, with luck, hiring.
Those 5 questions are: