Evidence that the UK economy has so far withstood the shock of Brexit has been provided by a Bank of England report that shows no general slowing in activity since the referendum.
The monthly survey by the Bank’s regional agents – considered to be the “eyes and ears” of policymakers in Threadneedle Street – found that a majority of firms questioned were not planning to mothball investment or change hiring plans.
The agents’ report was released at the same time as the Office for National Statistics reported that the labour market remained solid in the period from March to May, the first three months of the referendum campaign, with the jobless rate falling to its lowest level in more than a decade.
The chancellor, Philip Hammond, said the figures were “proof that the fundamentals of the British economy are strong”. He added: “As the economy adjusts to the effect of the referendum decision, it is doing so from a position of economic strength.”
The Bank of England said its agents had stepped up their investigations in the wake of the Brexit vote to find out how businesses were reacting. It found that for many companies the result had come as a shock, but with few having contingency plans, the tendency had been to adopt a “business as usual” approach.
“The outlook for investment was uncertain,” the report said. “The majority of firms spoken with did not expect a near-term impact from the referendum result on their capital spending. But around one third expected some negative effects over the next twelve months, with reports of a ‘risk off’ approach to expenditures and some imminent plans for spending slipping.”
The agents found that there had been a dip in housing market activity after 23 June but that transactions had so far proved to be more resilient than some contacts had expected.
“There had been little evidence of any impact on consumer spending on services and non-durable goods, although there were some reports of consumers becoming more hesitant around purchases of higher-value goods.”
The Bank’s findings were backed up by the latest trading report from the retailer John Lewis. It said spending in its department stores and at its Waitrose supermarkets were 3.2% higher in the week ending 16 July than they had been in the same week of 2015.
The pound rose on the foreign exchanges after the Bank’s agents report and the unemployment figures were released.
According to the ONS, there were 31.7 million people in work in the three months ending in May, 176,000 more than for the three months to February 2016 and 624,000 more than for a year earlier.
The government’s preferred measure of unemployment, the internationally agreed measure that looks at those without a job but seeking and available to work, fell by 54,000 in the three months ending in May to its lowest level since early 2008, when the economy was in the early stages of recession.
The ONS said the unemployment rate had edged down from 5% to 4.9% and was last lower in the July to September period of 2005.
This article was written by Larry Elliott Economics editor, for theguardian.com on Wednesday 20th July 2016 10.38 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010