More than four out of 10 finance directors believe that Brexit-related uncertainty for business will not be resolved until at least 2021 while a fifth fear that the UK will crash out of the European Union next year without a deal in place.
The monthly survey of almost 2,900 chief financial officers by the Bank of England carried out during the general election campaign last month found that 42 per cent did not expected the uncertainty surrounding to be resolved until 2021, up from 33 per cent in November.
The finding will add to fears that the decision by Boris Johnson to impose a deadline of 31 December to secure a free trade agreement with the EU will fray businesses’ nerves in the run up to the end of 2020.
The Bank’s decision maker panel of 2,887 firms also showed that 19 per cent believed that the UK would leave the EU this year without a deal, up from 16 per cent a year earlier.
However, the share of CFOs who believe that the UK will exit the EU this year with a deal rose to 46.6 per cent from 46.2 per cent. The bank also said its gauge of Brexit uncertainty in its monthly Decision Makers’ Panel survey fell to a six-month low in December.
More than half (53 per cent) of firms reported that Brexit was one of their top three sources of uncertainty in December. That was slightly lower compared to the average of the previous three months. However, Brexit-related uncertainty remains well above its average since the referendum.
Fears about renewed tensions between London and Brussels undermined the value of the pound. Sterling fell 0.4 per cent against the US dollar and 0.2 against the euro.
The drop against the dollar wiped off some of the 7.9 per cent rise in the pound’s exchange rate in the final quarter of the year, which had made it the strongest currency pair in the 2019 rankings by Deutsche Bank.
“Much of sterling’s gains came after prime minister Johnson and the EU agreed a new deal in October, and the gains in GBP/USD over the last three months mark the strongest quarterly performance since the second quarter of 2009,” said research analyst Henry Allen.
Capital Economics, the London-based consultancy, believes the pound will end 2020 almost 4 per cent higher at $1.35 by the end of the year as the outlook for the UK economy brightens thanks to reduced political uncertainty and a large fiscal boost.
“But sterling’s gains will be capped so long as some uncertainty lingers around the potential for a no-deal-like exit at the end of the current transition period in December 2020,” said Jonas Goltermann, a senior economist in its global markets team.
The pound is likely to be undermined by figures showing that the post-Christmas shopping period saw footfall drop by an average of 4 per cent compared with a year ago. Shopper numbers fell almost 9 per cent on Boxing Day, which used to be a traditional start of the sales, according to retail intelligence firm Springboard.
“Consumers are increasingly using Boxing Day primarily for leisure purposes, going out to eat or to the cinema, but possibly combining this with a visit to retail stores rather than shopping being the main focus of the trip,” said Springboard’s insights director Diane Wehrle.