Fall from grace, Brexit sentiment falters

Middle market leaders are growing concerned about what Brexit means for their business prospects over both the medium and long term as the ongoing negotiations and uncertainty take their toll.

RSM’s Brexit Monitor shows decision makers are no longer confident that they will emerge from Brexit stronger. Over the past three months, sentiment has dropped from 113 to 99 on a scale of 0 to 200 (where 0 represents a strong negative effect, 100 no effect and 200 a strong positive effect). 

Decision makers are marginally more positive about the impact of Brexit on their five-year business prospects, but confidence levels are starting to wane. The RSM Brexit Monitor shows sentiment dropped to 106. This is in sharp contrast to the results last quarter, when sentiment peaked at 122 – the highest score recorded since we began tracking middle market sentiment in May 2017.

Since the EU referendum, many businesses have faced an uncertain and volatile operating environment, but many believe the biggest impact of Brexit is still yet to come. Overall, businesses expect Brexit to have the largest effect their business within the next 12 months: 20 per cent believe it will hit around February 2019, while a further 22 per cent expect this to hit by August 2019. 

The business outlook could have been knocked by several factors, not least the release of the Brexit Whitepaper in July, which outlined the UK’s wishes for its future relationship with the EU. Decision makers may have also been spooked by the government’s release of 25 technical notes in August, which outlined what would happen if a deal could not be struck with Brussels.

Brexit monitor wave 6

Confidence is down in all industries about the impact of Brexit on their two-year prospects. TMT is the most subdued, falling 27 points to hit 100 on the RSM Brexit Monitor. This was closely followed by construction firms and consumer respondents, which dropped by 23 and 22 points respectively. While most still expect Brexit to have a positive impact, every sector is now noticeably less optimistic than 12 months ago . 

Regionally, the central region was the only UK area to grow more optimistic over the past quarter, up from 111 last quarter to 122 now. Meanwhile, decision makers in Scotland have emerged as the most pessimistic about the impact of Brexit on their two-year business prospects, with a sharp 60-point drop from 136 to 76 this quarter. 

Wave 6 brexit monitor regional sentiment 

Simon Hart, RSM’s Brexit lead partner, said: 'As we get closer to Article 50 Brexit day and therefore the end of the negotiation period, and with both parties seemingly at an impasse, our Brexit Monitor survey shows that middle-market businesses are getting more concerned about the UK government's ability to secure a good deal. The publication of the government’s technical notices, outlining the implications of a 'no deal' scenario, may have also dampened optimism in the prospects of a good deal.’