Sluggish UK economy held back by recruiting difficulties due to Brexit fears, research shows

Businesses said confidence and investment intentions fell in second quarter

The availability of skilled staff remains the biggest issue that firms in all sectors face, the survey showed (REUTERS)

The UK economy remains sluggish, with many firms reporting tough trading conditions and difficulty in recruiting due largely to Brexit uncertainty in the second quarter of 2018, new research shows.

According to the latest quarterly economic survey from the British Chambers of Commerce, consumer-facing service industries such as hospitality and retail reported a significant decline in cash flow and investment intentions due to continued subdued consumer spending.

In manufacturing, the balance of firms reporting improved domestic sales rose in the quarter, and the balance of firms reporting improved orders increased to the highest level since early 2015. However, the BCC said, the size of the sector means that its contribution to UK growth remains limited.

Across both sectors, the number of companies that said they intended to invest fell, and business confidence also dropped.

Meanwhile, recruitment problems remained the biggest problem businesses are facing; the percentage of manufacturing firms reporting issues in recruiting rose to 71 per cent, while the number of services firms struggling rose to 63 per cent.

Adam Marshall, director general of the BCC, said: “Amid growing international uncertainty, from escalating trade disputes to oil price rises, the UK economy continues to grow at a sluggish rate. Brexit is a key factor - but long-standing structural issues are also holding companies’ growth back.

“The availability of skilled staff remains the biggest issue that firms face. Unless the government gets a handle on the disarray in the training and apprenticeship system and sets out a clear immigration policy that enables firms to cover vacancies, the economic potential of many areas across the UK will continue to be held back.”

He added: “Business needs clarity on Brexit, and a strong domestic agenda that creates a ‘Brexit hedge’ as we navigate turbulence over the next few years. Big, bold action is needed for the UK to buck the current slow-growth trend - with major new incentives for business investment, confidence-boosting infrastructure projects, and a concerted effort to slash the up-front cost of doing business, which is putting consumer-facing businesses especially under intense pressure.”

The findings come after businesses last week called on the government to provide more information about the post-Brexit future. Jaguar Land Rover said it urgently needed more clarity or it would be forced to slash investment in the UK and shut down plants.

Meanwhile Airbus CEO Tom Enders on Friday accused the government of having “no clue” about how to proceed with Brexit “without severe harm”.