By Andy Bruce (Reuters)
LONDON - Britain's economy appears to be losing steam, with major business surveys showing a marked slowdown in the services sector and boardrooms beset by doubt about the future following the country's vote to leave the European Union.
While the economy has fared better than most economists expected since June's Brexit vote - largely thanks to upbeat consumers - Monday's surveys will heighten concerns about its longer-term prospects.
Key measures of business investment and turnover confidence hit four-year lows in the third quarter, the British Chambers of Commerce (BCC) said in its Quarterly Economic Survey of 7,000 businesses - the largest of its kind.
Separately, chief financial officers (CFOs) in major British firms reported only a partial rebound in business morale after a post-Brexit vote nosedive, accountants Deloitte reported.
Investors have become increasingly concerned that Britain will lose many of the preferential trading terms it has with the EU - a so-called "hard Brexit" - pushing sterling to a fresh 31-year low against the dollar last week.
The Confederation of British Industry and other groups called on Saturday for the government to rule out the "really worst" trade options, to unblock investment held up by fears that the government will prioritize other goals in Brexit talks.
While the BCC survey offered some signs the weak pound has boosted manufacturing exports, it also pointed to a noticeable slowdown among services companies that form the backbone of Britain's private sector economy.
"The slowdown in services is concerning because it obviously is the dominant sector in the UK economy. It's slowed down to levels we haven't seen in several years," Adam Marshall, the BCC's acting director general, told Reuters.
He added that it was important not to read too much into a single quarter's data, pointing out that growth appeared to be slowing before the referendum.
Investors have become increasingly doubtful that the Bank of England will cut interest rates again this year, given robust consumer spending and sterling's renewed plunge.
But policymakers will regard the BCC and Deloitte surveys as consistent with their view that the economy will slow markedly next year.
The BCC said its latest survey - which was conducted between Aug. 22 and Sept. 12 - is in line with its forecast that economic growth in 2017 will amount to just 1 percent, half its average rate since the 2008-09 recession.
The BCC's gauges of manufacturers' plans to spend on plant and machinery, and service sector investment in staff training, each fell to their lowest levels since the third quarter of 2012 - around the last time Britain flirted with recession.
"A lot of businesses have decided to step back and take stock before proceeding with investments over the coming months," the BCC's Marshall said.
"It's probably a logical response to uncertainty, but it makes it all the more important that the (finance minister's) autumn statement delivers positive steps to 'crowd in' business investment and build business confidence," he said.
Finance minister Philip Hammond last week pledged to protect British businesses from turbulence during negotiations to leave the EU, but warned economic confidence could go "on a bit of a rollercoaster". He is due to set out his economic policy in his autumn statement on Nov. 23.
The Deloitte survey - conducted at 124 large firms from Sept. 12 to Sept. 26 - suggested the outlook for capital expenditure and hiring improved in the third quarter, compared with its previous poll of CFOs taken in the immediate aftermath of the Brexit vote.
"The animal spirits of the corporate sector took a battering in the wake of the referendum and, three months on, Brexit continues to loom large for the UK corporate sector," Deloitte chief economist Ian Stewart said.
"CFOs remain concerned about the long-term impact of Brexit and two-thirds believe it will lead to a deterioration in the UK business environment."
Some 40 percent of CFOs said they expected to cut investment over the next three years, down from 58 percent just after the referendum, while 46 percent expected hiring to slow, down from 66 percent before.
Rising inflation looks likely to be another issue for businesses next year.
The BCC survey showed a sharp increase in the proportion of manufacturers expecting to increase prices, reflecting a sharp increase in raw material costs - in part due to sterling's weakness.
(Editing by Susan Fenton)