DORSET should brace itself for less growth, fewer jobs and lower living standards in the wake of the Brexit vote, a report has warned.

The author of a Bournemouth University analysis said there could be “better days” for the economy in the longer-term but that prospects would worsen for the foreseeable future.

In the university’s latest Regional Economic Development Business Intelligence Report, Professor Nigel Jump said the economic outlook had deteriorated.

He said “anecdotal signals” from Dorset businesses had been mixed since the EU referendum.

“The mood has been generally more cautious than it was, with many sectors from manufacturing, through retailing and car sales, to property and other services declaring a sudden loss of business momentum after the referendum,” he said.

“What little evidence we have suggests there was an immediate drop in household spending, affecting retailing, tourism and leisure locally; a decline in property movements – affecting commercial and housing sales; and a continuation of the caution with respect to business investment that was evident in the second quarter.”

He said the drop in sterling would help some exporters but hurt importers, along with those exporters who needed to bring in their components and materials from abroad.

Prof Jump said the economy was already constrained by low productivity growth and weak competitiveness, shown by persistently large trade deficits. Uncertainty over the meaning of Brexit would not make these easier.

He warned of the possibility of “stagflation” – inflation coupled with unemployment and stagnant demand – over the next 18 months.

He said a banking “malaise” could dampen the flow of credit. The Treasury under Theresa May and Philip Hammond could be more willing to borrow and spend, but its industrial and EU funding policies were unclear.

“The economics of Brexit are straightforward. The creation of economic barriers, borders or boundaries, whether real or psychological, always leads to an increase in costs,” he said.

“That increase in costs, exacerbated by broader uncertainty, stalls investment, reduces output and cuts employment compared with what otherwise might have occurred.”

He added there would be winners and losers but the net effect was “one of worsening growth prospects”.

He added: “Brexit will affect many Dorset businesses and households. Some of these effects will be immediate and obvious; some will be postponed and insidious and some will not have noticeable impacts for several years. But, on average, in due course, less investment means growth and lower living standards.

“In this respect, we should not be distracted by one-off (good or bad) data releases or items of business news over the weeks and months ahead. The important thing is the change to performance potential, and realisation, over the long run.”

He said the economy “may start to recover” after 2020, while after eight years’ time it could be back, or beyond, where it would have been without Brexit.

He also signalled concerns about global companies investing in the UK. “In a decade, the fear is that the next family of aerospace, motors and other engineering and electronics products and services go, at least partially, elsewhere,” he wrote.

He said regional development activity was vital.

“Even as the Brexit storm rolls over us, we can prepare for better days,” he added.