As soon as the Brexit victory became clear, financial markets around the world fell - no more so than in the U.K., with the pound falling to a 31-year low. But global financial market have surprised many people by recovering faster than expected in the immediate weeks following the Brexit vote. Nonetheless, confidence in the U.K. economy is starting to look shaky.
A preliminary purchasing manager's index (PMI) of U.K. manufacturing and services published on Friday showed that activity across the sectors contracted in July at the steepest pace since early 2009. Chris Williamson, chief economist at Markit which compiled the data, told CNBC that the figures showed a "dramatic deterioration" in the UK economy after Brexit.
"What we're seeing here is the largest points fall in our composite index across manufacturing and services that we've ever seen so this goes back nearly 20 years," he said. "The big question is where we go from here…There are firms saying that they've had contracts lost, cancelled, new orders not coming in anymore, which is predominantly linked to Brexit uncertainty."
One bright spot, Williamson noted, was that the weaker pound had boosted exports orders for manufacturing and signs that confidence had picked up on the stabilizing political scene in the U.K. Given the drop in sterling, U.K. firms are seen as ripe for takeovers. Earlier this week, Japanese firm Softbank agreed to buy semiconductor firm ARM Holdings in a deal worth more than $32 billion. (103794754)
Britain has wasted no time in trying to court free trade deals with the likes of India and China and new Chancellor Philip Hammond has headed to China on Friday to reaffirm that Britain is "open for business". Speaking of the visit, China-Britain Business Council chairman, Lord Sassoon, told CNBC that the U.K. was still as attractive now as it was a month ago
"We've got plenty to work on here. (There's) $80 billion worth of bilateral trade (at stake), the U.K. is the second largest trade partner for china in Europe and it's the preferred destination for investment in Europe," he told CNBC's "Street Signs" on Friday.