A recent study of businesses across all sectors and regions by top 40 accountants Bishop Fleming reveals confidence is holding up, despite uncertainty over the UK's likely divorce deal with the EU.
The firm's latest Business Barometer shows that 44% of business owners remain confident about the year ahead, an improvement on the 32% confidence vote taken just after the EU referendum.
Although still low, the survey revealed a stabilisation in confidence over the last 6 months, welcomed by the firm. The study also showed a renewed drive to hire staff – with three out of five surveyed planning to take on more workers in the year ahead, up from just under half being willing to do so only three months earlier.
According to Matthew Lee, Bishop Fleming's Managing Partner: “Despite concerns over spiralling employment costs, firms in some sectors want to get on with the job and appear more willing to recruit.”
On the downside, the survey revealed a rise from 28% to 36% of businesses expecting to see no increase in sales over the next twelve months, reflecting an element of gloom in certain sectors of the economy.
Mr Lee commented: “Consumer demand has undoubtedly been dampened by Brexit and the government's austerity measures, resulting in some industry sectors continuing to struggle. This is concerning where labour costs and business rates are rising to put margins under pressure. The economy may begin to slow down next year at the same time as inflation and interest rates rise, so particular sectors may face financial problems and a rise in insolvencies.”
The survey also revealed a small downturn from 65% to 59% in businesses planning to invest over the next twelve months,
Mr Lee said: “This small fall in investment intention is disappointing, though the rise in planned recruitment could mean that some budgets are being reallocated at the expense of capital spending. I remain concerned that firms do not want to invest, despite borrowing costs being at historic lows.”
On the international front, 3 out of 5 businesses with overseas trading interests continue to expect no increase in overseas trade over the next twelve months. This figure has held steady since the Brexit vote. There was, however, a small increase from 41% to 45% of firms anticipating that the fall in the value of Sterling will have a positive effect on their trade.
Mr Lee commented: “The fall in the value of the pound since the Brexit vote has made our goods and services more attractive for overseas customers, though it also generates price inflation for our imports. We need to improve our balance of trade and improve the export ambitions of our companies.”
He added: “As the hard talking between the UK and the EU begins over a post-Brexit trade position, coupled with a slowing Chinese economy and Eurozone debt problems, businesses face an extraordinary level of uncertainty. We have also yet to fully understand the effects of President Trump's proposed tax cuts and his protectionist agenda, which risks putting the UK and US in direct competition with each other for inward investment.”
He continued: “Overall, the survey reveals that although uncertainty remains, business owners are getting on with running their companies, though they are avoiding any major investment decisions whilst business sentiment remains fragile. The UK has an unprecedented opportunity to develop new fiscal, trade and investment strategies for life outside the EU, and I hope to see these materialise in a pro-business Budget on 8 March.”