Brexit shockwaves hit British jobs, banks LONDON: Shockwaves from Britain’s vote to leave the European Union rocked the economy on Thursday, with thousands of jobs lost at one of the country’s biggest banks, big extra costs for Ford, and consumer confidence plunging.
Preparing for a Brexit-related slowdown, Lloyds Banking Group said it would cut a further 3,000 jobs. One of Britain’s biggest car dealerships, Inchcape, predicted growth in new car registrations would fall.
Ford Chief Financial Officer Bob Shanks said a weaker British pound following the June 23 Brexit vote had cost the company about $60 million in the second quarter.
The 2016 impact of Brexit on Ford, which has 30 per cent of its European sales in Britain, was expected to be $200m, and each year until Britain leaves the EU would cost it $400m to $500m. Speaking in Detroit, Shanks said all options were on the table for cost cuts in Europe, although Ford was not ready to announce any plant shutdowns.
A month after the referendum, the latest signs of an economic slowdown are likely to fuel expectations of action by the Bank of England on Aug 4, when many economists believe it will cut interest rates and might start buying bonds again to pump money into the financial system.
“The public are still absorbing the EU referendum result but it is clear that consumer confidence has taken a significant and clear dive,” said Stephen Harmston of the YouGov polling organisation.
Lloyds, Britain’s largest retail bank, said it aims to save 400m pounds ($530m) by the end of 2017 by axing the additional jobs on top of 4,000 positions it has already said it would cut from its 75,000-strong workforce. It would close an additional 200 branches.
“Following the EU referendum the outlook for the UK economy is uncertain and, while the precise impact is dependent upon a number of factors including EU negotiations and political and economic events, a deceleration of growth seems likely,” it said.
The economy grew fairly robustly in the run-up to the vote but economists expect businesses and consumers to cut back after the referendum shock, although a dive in the pound has helped some companies which make most of their earnings aboard.
Rolls-Royce shares rose sharply after it forecast profits would improve in the second half of the year, helped by a pick-up in deliveries of large aero engines.
Drinks group Diageo, reporting higher sales, said it had not so far seen any impact from Brexit. The company is the world’s biggest maker of Scotch whisky, which is mostly exported and would benefit from sterling’s weakness.
Another winner was Merlin Entertainments, which runs tourist attractions such as Madame Tussauds waxworks and Legoland and expects to benefit from the lower pound attracting more foreign visitors to its British sites.But travel company Thomas Cook cut its profit target as the weak pound, together with attacks in Europe and a failed coup in Turkey, persuaded British customers to change their holiday plans abroad.
An index of British consumer confidence plunged nearly five points to 106.6 in July – matching its biggest fall in six years and hitting its lowest level since 2013, polling firm YouGov and the Centre for Economics and Business Research (CEBR) said.
People are particularly worried about what will happen to the value of their homes, the survey found.
The European Commission’s consumer confidence gauge for Britain suffered its biggest monthly drop in July since January 1991, hitting its lowest level since June 2013.