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British Companies Lower Their Investment Expectations

A new survey of businesses in the UK has revealed that they have reduced their intended investment levels for the rest of 2020. This follows on from the news that the country is likely to suffer a bigger drop in GDP than any of Europe’s other most developed nations.

A Record Drop in Investment

The Institute of Directors (IoD) carried out a survey of its members, to find out the level of confidence in the business world currently. It came back with a record drop in investment intentions of 11%, down to -43%.

This is despite the lockdown beginning to ease and the overall confidence that they have in the British economy rising from -69% last month to -60%. Tej Parikh is the chief economist at the IoD. He said that companies are feeling a greater degree of optimism in their own recovery than in that of the wider economy.

However, Parikh thinks that it is still too early to confirm if small and medium-sized companies are now out of danger. Many businesses still need Government support to get through the rest of the year at a good rate of recovery, according to the economist.

It has been reported that Bank of England officials are worried that that recovery will be slowed by companies failing to spend on vital new equipment and upgrades. Many are using the services of a debt collection agency to keep going, while the furloughing scheme remains in force as well.

The GDP Forecast

Meanwhile, the Organisation for Economic Cooperation and Development (OECD) has forecast that the UK’s GDP will fall by 11.5% in 2020. This would put it at the head of the rest of the continent’s most developed nations, with a bigger slump than the likes of Italy, France, Germany and Spain.

In Germany, the GDP is expected to suffer a more modest 6.6% decline this year. Spain is forecast to show 11.1% less in 2020, with Italy losing 11.3%. In second place behind the UK is France, with 11.4% of its GDP to be lost due to the coronavirus pandemic and lockdown.

The OECD pointed out that countries with the most severe lockdown restrictions are those that will face the longest and most difficult road to recovery. UK Chancellor Rishi Sunak pointed out that “many other economies around the world” are suffering in the same way as Britain right now.

In terms of unemployment numbers, the UK is likely to post an increase of about 9%, which puts more pressure on negotiators to secure a sustainable trade agreement with the EU for access to the single market following Brexit.

The OECD took this matter into account, pointing out that the failure to agree a trade deal or have some alternative arrangement in place by the end of 2020 is likely to have a “strongly negative effect on trade and jobs”.

On the same subject, credit ratings agency Moody’s confirmed that a no-deal Brexit would “significantly damage “the country’s recovery from the current recession.