* Sales tax revenues stall in April, official data shows
* Retailers most pessimistic about outlook since 2012
* Figures add to signs of consumer-led slowdown
* EY survey shows Brexit doubts affect foreign investors
(Recasts, adds reaction)
By Andy Bruce and William Schomberg
LONDON, May 23 The Brexit squeeze on British
consumers has hurt the government's finances as well as
retailers, data showed on Tuesday, indicating that the economy's
slowdown at the start of the year is now being felt more
A stalling of sales tax revenues, a barometer of the
economy, helped to widen Britain's budget deficit by more than
expected, official data showed.
A separate survey showed business confidence among retailers
declined at the fastest pace since 2012, around the last time
Britain flirted with recession.
Britain's economy was barely ruffled last year by June's
shock vote to leave the European Union. But a steady rise in
inflation since the referendum, combined with weak wage growth,
has slowed its momentum this year.
Official figures due on Thursday are expected to confirm
that the pace of growth more than halved in first three months
of 2017, a contrast with strong growth in the euro zone so far
"Today's numbers show the public finances have started to
feel the effects of the economic slowdown, which will likely
continue to feed through to softer revenue growth," said HSBC
economist Elizabeth Martins.
The headline budget deficit measure rose 13 percent to 10.4
billion pounds ($13.5 billion) in April, the first month of the
fiscal year, the Office for National Statistics said.
The figure was higher than all forecasts from economists
polled by Reuters.
As well as slow growth in tax revenues -- payments of income
tax rose by little more than 1 percent from a year earlier --
the overshoot reflected a sharp jump in interest payments on
British government bonds, some of which are linked to inflation.
Prime Minister Theresa May, who opinion polls show is on
course to win a June 8 election, wants to eliminate the budget
deficit by the middle of the next decade.
Martins from HSBC said running down the shortfall may prove
trickier than in the past because many of the easier savings
measures have already been made.
The scale of the challenge has been illustrated by the
uproar over May's plans to shift more of the cost of caring for
elderly people from taxpayers to homeowners. On Monday, May
softened the plan by saying she would make sure there was a
limit on the amount people would have to spend.
The uncertainty about how sharply Britain's economy will
slow is also taking a toll on retailers' investment and hiring
plans, the Confederation of British Industry (CBI) said.
The CBI's monthly retail sales balance slid back to +2 in
May from +38 in April, a four-month low and worse than all
forecasts in a Reuters poll of economists that had pointed to a
reading of +10.
"It's clear that households are increasingly feeling the
pinch, as rising inflation pushes down on real earnings," CBI
economist Alpesh Paleja said.
Also on Tuesday, accountants EY said Britain continued to
attract foreign investment but there were also warning signs
that Brexit might hurt its appeal.
Britain remained the number one location for foreign direct
investment in Europe in 2016, ahead of Germany, according to a
survey conducted by EY.
But Germany extended its lead in terms of securing new
investment -- rather than expansion of existing projects -- and
it also added to its advantage in attracting projects from
emerging economies such as China.
Furthermore, almost one third of global investors expected
Britain's attractiveness to deteriorate over the coming three
years, "suggesting Brexit may be starting to colour investors'
views of the UK," EY said.
(Editing by Catherine Evans)