A recent study of businesses across all sectors and regions by top 40 accountants Bishop Fleming reveals a record rise in confidence, despite continuing uncertainty over the UK's likely divorce deal with the EU, and the general election.
The firm's latest Business Barometer shows that more than half of business owners are confident about the year ahead. With 53% saying they are now more optimistic about the economy than they were 12 months ago, an increase of over 20% on the 32% confidence vote taken just after the EU referendum in June 2016.
The increase in confidence was welcomed by the firm as evidence from the “coal face” that the economy is improving, even though uncertainty remains about the shape of the post-Brexit landscape.
The study also showed that three out of five firms are expecting to take on more staff in the next year, which is in line with previous survey results.
According to Matthew Lee, Bishop Fleming's Managing Partner: “Despite concerns over spiralling payroll and pension costs, there is clear evidence that firms are wanting to recruit. However, competition for skilled workers is likely to increase because of Brexit.”
The survey revealed that four out of five businesses are expecting to see an increase in sales over the next twelve months, reflecting an increase in confidence in certain sectors of the economy.
Mr Lee commented: “Consumer confidence appears to be rising, confounding expectations, though whether this will translate into sustainable demand in the face of inflationary pressures and a downturn in real wages remains to be seen. The economy may begin to slow down next year at the same time as interest rates start to rise, so particular sectors may face financial problems.”
Coupled with increasing confidence, the survey also revealed an upturn in business investment intention from 59% to 71%,
Mr Lee said: “With more than three out of five firms looking to increase investment over the next twelve months, this is very encouraging, and maybe a sign that certain sectors want to take advantage of historically low interest rates while they can.”
On the international front, half of businesses surveyed with overseas trading interests expect to see an increase in overseas trade over the next twelve months. This up from 39% earlier in the year and reflects firms expecting the fall in Sterling to have a positive impact on 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. Despite government efforts to encourage more exports, we still need to see an improvement in our balance of trade with a properly worked-out, government-backed international trade strategy.”
He added: “As the serious negotiations between the UK and the EU begin about what the post-Brexit relationship will be after March 2019, businesses face an unprecedented level of uncertainty. And whilst we are starting to see how the Trump administration is working, we are still waiting to gauge the effect of the President's proposed tax cuts and protectionist agenda, which risks putting the UK and US in direct competition with each other for inward investment.”
He continued: “Overall, the survey reveals increasing confidence in the economy, though how deep this is remains to be seen. It is encouraging that more firms seem willing to invest, though such sentiments may remain fragile. As the Brexit talks progress, it will become more apparent as to the risks and opportunities of life outside the EU, which will shape fiscal, trade and investment strategies for the medium term.”
Matthew Lee, Bishop Fleming's Managing Partner