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[LONDON] The Bank of England has yet to see evidence of a sharp economic slowing, even after UK businesses said the vote to leave the European Union had caught them by surprise.
While uncertainty rose "markedly" after the June 23 referendum, most firms did not expect the near-term impact to alter their investment or hiring plans, according to the BoE's agents' summary of business conditions, based on information from a network of businesses across the UK that help the BoE decipher what's going on in the economy.
But around a third of contacts thought there would be "some negative impact" over the next twelve months, according to the BoE report. That tallies with a survey this week by manufacturing organisation EEF, which said there has been little change in orders so far, though demand is expected to weaken over time.
The drop in the pound following the referendum result was expected to boost export turnover, especially for manufacturers over the coming year, the BoE said. Offsetting that, the weaker sterling could also mean higher costs for some industries and higher prices for consumers.
Uncertainty since the vote has prompted Bank of England Governor Mark Carney to signal he's willing to boost stimulus early next month, while the International Monetary Fund on Tuesday slashed its UK outlook.
The impact of the referendum won't start fully showing up in official data until the middle of August, according the Office for National Statistics, leaving the Monetary Policy Committee with the dilemma of taking action without a complete picture.
"Given the potentially very large impact that a Brexit could have, it's one of those things you want to act quite quickly on," said Chris Hare, an economist at Investec in London.
"And for want of anything else, all you've got to go on are anecdotes and surveys, and it seems to me that most of the committee are going to take that as enough to move on policy."
According to the BoE report, some companies were considering alternative European locations. However, a number of contacts mentioned possibility of moving production back to UK, or increasing domestic sourcing of products, because of sterling's 12 per cent slide since the referendum.
The MPC said last week that early signs showed the referendum result had affected sentiment among households and companies, and businesses were beginning to delay investment or postpone recruitment.
In the agents' report, it said banks' appetite to lend was said to be maintained, although demand for credit was easing.
Policy maker Martin Weale said Monday that he needs to see harder evidence of Brexit's effect before supporting additional stimulus. Other officials are more certain they need to act pre-emptively, with Gertjan Vlieghe and chief economist Andy Haldane saying last week that they'd vote for additional stimulus at the next meeting.
The report comes as a welcome relief for embattled UK economy. In a separate release Wednesday, Markit Economics said that a gauge of the outlook for household finances fell this month to its lowest level in two and a half years.
The group's overall index of household finances also dropped.