By Andy Bruce and James Davey
LONDON (Reuters) - British consumer confidence suffered one of its biggest drops in 21 years and the country's largest department store expressed concern over the pound's fall, in the strongest evidence to date of the challenges Britain's economy faces after the Brexit vote.
The vote to leave the European Union has thrust Britain into its worst political crisis in modern times. Investors have warned that what was ranked as the world's fifth largest economy faces years of uncertainty over everything from trade to investment.
In a special post-referendum survey published on Friday, market research company GfK said consumer confidence fell 8 points to -9 in the aftermath of the June 23 vote from -1 in its previous regular monthly survey.
"During this period of uncertainty, we've seen a very significant drop in confidence, as is clear from the fact that every one of our key measures has fallen," said Joe Staton, Head of Market Dynamics at GfK.
The last time the index, which dates back to 1974, fell so steeply was in January 2011, and the last time it fell more was in December 1994.
Moody's credit rating agency said on Friday Britain faced a shock to confidence and almost halved its UK growth forecast for next year to 1.2 percent from 2.1 percent. Moody's also cautioned that the Brexit vote could potentially threaten the existence of the EU, which has a $16.5 trillion economy.
"The potential strengthening of nationalistic and protectionist movements could have a detrimental effect on the EU, even threatening its existence," the credit rating agency said. It expected global spillovers to be limited, however.
The International Monetary Fund said growth in the euro zone would decelerate to 1.4 percent in 2017 from 1.6 percent this year due to uncertainty caused by the Brexit vote.
With households and investors left guessing about what the future relationship with the EU will look like, sterling has suffered its worst three-week performance against the U.S. dollar since 1992 when Britain crashed out of the pre-euro Exchange Rate Mechanism.
Sterling dipped under $1.30 this week the first time since 1985. It was trading as high as $1.50 just hours after voting ended in the referendum.
Amid the turmoil, Bank of England Governor Mark Carney said on June 30 that the central bank would probably need to pump more stimulus into Britain's economy over the summer.
The Bank's rate setting committee is due to make its monthly policy announcement on Thursday. Most economists polled by Reuters expect it to hold off on any action until it releases new economic forecasts in August.
The depreciation of sterling could potentially become a major issue for John Lewis, Managing Director Andy Street said late on Thursday.
"Genuinely it is a big issue for us to face into next year," Street told reporters at a media dinner. John Lewis imports about two-thirds of the goods it sells and one third is purchased in dollars.
Street said while the firm is fully hedged for its 2016-17 financial year and has "a good proportion" of hedging for the first half of its 2017-18 year, it has "a lot less" for the second half.
"It can never be quite that simple because you don't know where cost inflation comes through from other things that are imported, perhaps one stage away from direct importing," he said.
PESSIMISM
GfK reported that people who wanted to stay in the EU -- 48 percent of those who voted -- were much more pessimistic than the 52 percent who voted to leave.
"Our analysis suggests that in the immediate aftermath of the referendum, sectors like travel, fashion and lifestyle, home, living, DIY and grocery are particularly vulnerable to consumers cutting back their discretionary spending," said Joe Staton, head of market dynamics at GfK.
The survey also showed a distinct regional difference in perceptions, although this did not appear to be linked with how regions voted.
In the north of England, confidence dropped 19 points and in Scotland 11 points, while in the south, including London, there has been a 2-point drop, GfK said.
Most people in the north of England voted to leave the EU, whereas Scotland and London voted strongly to stay, by a margin of around two-to-one.
The biggest drop in confidence, from an income perspective, was a fall of 16 points among households with income levels of 25,000-49,999 pounds.
Bolstering the case for those who say Britain will pay a heavy economic price for the Brexit vote, accountants BDO said retail sales spiralled lower through the month as the referendum campaign reached its climax.
BDO's High Street Sales Tracker showed like-for-like retail sales fell 3.6 percent year-on-year last month, the worst June in more than a decade. Although the month started well, BDO said sales fell at a progressively faster pace through the month.
And a survey from the Recruitment and Employment Confederation showed the number of permanent staff hired via recruitment firms fell for the first time since December 2012 -- around the last time Britain's economy flirted with recession.
Permanent salary growth slowed to its lowest level since September 2013, according to the REC survey, conducted by data company Markit in the week before the referendum result.
"The best thing for business right now is clear and calm leadership and as much clarity as possible on what the post-EU future will look like," said REC chief executive Kevin Green.