Business sentiment in the UK fell to a three-year low in June as firms reeled from the country's vote to leave the European Union, a report has revealed.

Accountancy and services firm BDO's business optimism index – which predicts growth six months ahead – fell to 98.9 from 99.4 in May, while the output index fell to 99.0 from 99.7.

More from IBTimes UK

The report is compiled by incorporating a number of business survey results, including those from the Confederation of British Industry, Bank of England Agents and Markit.

BDO warned that business sentiment in the UK will take a further hit in July, as firms come to grips with the uncertain economic climate created by the Brexit vote.

According to the report, the business output index has now fallen for 10 months in a row.

"Economically, an expected consequence of the vote is a contraction in the size of the economy in the short term, as firms put plans for the future on hold until more is known about the UK's new regimes regarding trade and the political landscape," BDO said in its report.

"Both service providers and manufacturers face serious threats in the wake of the British exit – the UK's crucial financial services sector faces the loss of its 'passporting' regime, which allows banking and insurance firms operating in London to use their license throughout the EU."

Peter Hemington, partner at BDO, told Press Association: "In all likelihood, whatever arrangements the UK eventually arrives at with the EU won't look very different from what we have at the moment.

"So businesses cannot afford to get caught up in the hysteria. They need to hold their nerve and continue to invest in the UK."

Brexit EU Referendum European Union