Companies told 'new normal' is in six months

Companies must wait a further six months before the economy finds a “new normal” in light of the UK’s Brexit decision, it was forecast yesterday.

So in contrast to the three months before the EU referendum, when the number of traders in ‘significant distress’ actually fell, the UK faces “at least” half a year of turmoil, says Begbies Traynor.

The insolvency firm also says that smaller enterprises were the most vulnerable in the run-up to the vote, at odds with outfits based in London whose financial footing improved the most between April and June.

But over the next six months at least, “any positive improvements seen since April are likely to be reversed,” cautioned the firm, after its regular quarterly check-up into the health of UK companies, including those in the IT sector.

“Weaker consumer confidence and the deferral of investment plans…[are] likely to impact spending and business growth in the short term,” said Begbies Traynor executive chair Ric Traynor.

“We expect the business environment to worsen over the next six months, at least, before we settle into the ‘new normal’.”

The Bank of England’s commitment to maintain interest rates at a record low, and the possibility of a corporation tax cut to 15 per cent, are potential, positive stabilisers.  

Mr Traynor hinted either one could help firms get through what will be a “long haul” for the UK, as it moves to exit the EU, settle the freedom of movement issue and agree new trade deals.

Another believer that businesses are without a quick-fix to the uncertainty brought about by the Brexit vote is the Association of Recruitment Consultancies (ARC).   

“Recruiters and employers ought not to expect or seek any quick decisions on labour law changes,” ARC says. “­­The government is likely to focus on first establishing how UK relations will work with the EU in the longer term.”

Elaborating, ARC’s Adrian Marlowe said the UK might sign up to key elements of labour law established in the EU as a condition of continuing to do business in Europe without sanctions or tariffs.

“This may require us to retain certain current regulations, for example the AWR,” he said.  “Similarly, the rules relating to freedom of movement of workers will undoubtedly… [need] much burning of the midnight oil to be done before any deal can be struck.”

Nonetheless, the association is upbeat. “The advantages of dealing with UK businesses remain as before [the referendum],” it said. “The Brexit vote has not changed the quality of UK recruitment businesses and services one bit”.

With a similar outlook is the Freelancer and Contractor Services Association (FCSA), which has said that for its member companies serving contractors and other independent workers, the aftermath of the Brexit decision is, so far, “business-as-usual.”  

Moreover, although “leaving the EU will undoubtedly bring a period of uncertainty,” FCSA’s Julia Kermode says she foresees demand for contractors “increasing, particularly if the rules on immigration tighten up.”