UK Edition
Business optimism deteriorates 'out of all recognition' in UK after Brexit vote
European business optimism has plummeted in the wake of the EU referendum, driven by a "collapse" in UK sentiment, according to Credit Suisse.
Two thirds of European companies now expect to postpone or reduce spending in the UK over the next six months, a survey by the bank showed.
UK prospects had "deteriorated out of all recognition", with the balance of companies expecting corporate spending to increase versus decrease falling to "unprecedented" levels, it said.
Uncertainty surrounding Britain's future trading relationships meant spending decisions were now largely an "act of faith", while hiring plans were in "free fall", analysts said.
Richard Kersley, one of the authors of the report, said: "The outlook for employment in the UK is highly challenged."
Almost half of respondents said they would delay UK hiring decisions until the country's future trading relationship with the EU was clarified.
Around 10pc said they would hire more workers in other EU countries instead.
Most executives said they would implement deeper spending cuts to advertising and travel budgets, as well as hold back investment in plant and machinery.
While the sample size of 80 European executives is small compared with other surveys, Credit Suisse said the balance of companies expecting to decrease spending slipped to -8.8pc after the referendum, compared with 4.7pc ahead of the vote.
This is the first time the survey has shown a negative reading since 2013. In the UK, the reading dropped to a record low of -52.5pc.
Two thirds of the companies polled have revenues in excess of €1bn.
The bank said there was currently limited evidence that the Brexit vote had hit spending decisions in the rest of Europe significantly.
It expects the weak backdrop will prompt the Bank of England to slash interest rates to just 0.05pc on Thursday, from a current record low of 0.5pc.
"This is a UK rather than a Continental European phenomenon," analysts said.