BUSINESS confidence has fallen at its fastest pace for seven years and spending has been cut as the Brexit vote begins to bite, a report has revealed.

The Confederation of British Industry (CBI) says optimism has dropped away after the EU referendum result, with expectations over total new orders now standing at depths not plumbed since 2012.

According to its Industrial Trends Survey, the CBI said more than half of firms are less optimistic about their futures compared to three months ago, despite output rising at its fastest pace for two years.

The warning comes after the Markit Flash UK Composite Output Index last week showed the British economy had slumped at its quickest pace since the financial crisis in the wake of the Brexit vote.

Unveiling its results, the CBI said 30 per cent of the 506 companies responding to its survey had seen output rise over the last three months.

However, investment took a serious knock, with building spending at minus 23 per cent compared with plus six per cent in April.

Outlays on plant and machinery also slid to minus five per cent.

Total orders for July hit minus four per cent, compared with minus two per cent in June, while export order books fell to minus 22 per cent.

Total new orders in the next quarter are predicted to be flat, which would be the lowest balance since January 2012.

Rain Newton-Smith, CBI chief economist, said businesses want government support to alleviate their worries.

She said: “Manufacturers picked up the pace over the second quarter, with output growing solidly and we’re also seeing encouraging signs of a boost to export competitiveness from a weaker sterling.

“But it’s clear a cloud of uncertainty is hovering over industry post-Brexit.

“We see this in weak expectations for new orders, a sharp fall in optimism and a scaling back of investment plans.

“So, it’s important now for the new government to steady the ship with a plan, and a clear timetable, for negotiating the UK’s relationship with the EU.

“This, along with a renewed focus on industrial strategy, will help give firms the confidence they need to grow and create jobs.”