Positive signs

Business confidence may be booming, but the government must keep working hard for Britain’s SMEs, says the ICAEW’s head of enterprise, Clive Lewis

Positive signs

The latest ICAEW/Grant Thornton Business Confidence Monitor (BCM) report tells us that, at +24, confidence is at its highest since 2010. But what’s in the data? What does it mean? Perhaps everything.

During the credit crunch, as a country, we printed billions of pounds, so there was even more money than before 2007. People in businesses of all kinds, most notably, but not exclusively, banks, chose to hold on to what they had. The flow of money dried up because people weren’t confident enough to invest or spend it.

BCM has been shown to be a very accurate predictor of GDP. We’re predicting the UK economy will grow by 1% next quarter – again something not seen since 2010. In fact, 1% growth is something we have only seen a few times since the middle of 2006.

So, what’s in the data to point to a steady period of growth? For the third consecutive quarter, confidence is positive across all regions and sectors. Northern England and Scotland are the most optimistic regions. London continues to recover confidence following a period below the national average. Confidence in Wales now stands above the national average – the second largest increase in confidence behind Northern England.

In SMEs, the trend matches that of larger businesses and the overall market, albeit that the confidence index is a fraction lower at +20. Previous data shows a steady increase of confidence from this sector – no knee-jerk reactions; just a measured, pragmatic response to the improving market.

 

Key findings for Q3 2013 show:

• The BCM Confidence Index stands at +24, up from +16.7 in Q2 2013 and at the highest level since Q2 2010

• The economy is expected to grow by 1.0% in Q3 2013 – this would represent the fastest economic growth since Q2 2010

• Businesses expect improvements in their turnover and profits for the next year, forecasting growth of 4.9% and 4.6% respectively

• Companies are looking ahead with plans to increase staff numbers by 1.6% in the next 12 months, while wages are expected to grow by 1.8%

• Confidence in the construction sector has rebounded strongly – an encouraging sign that the worst may be over for a sector hard hit by the economic downturn

• There are no signs, however, of an investment-led recovery, with capital investment growth low and limited increase in exports expected

 

Export growth is up, standing at 3.4% and, encouragingly, businesses are expecting growth of 4.1% over the next year. But, while businesses are increasing their exports, we are not seeing the levels of growth needed to deliver a trade-led recovery.

Decisions such as where to invest are still being made on a short-term basis, which explains the improvements in the housing sector and increased consumption by households. To get a stronger commitment from companies, and to ensure that a broad-based recovery has solid foundations, the government must continue to ensure the business environment remains conducive to growth. 

You can view the the full report at http://www.icaew.com/en/about-icaew/what-we-do/business-confidence-monitor

ABOUT THE AUTHOR
Clive Lewis
Clive Lewis
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