Election impact reflected in ICAEW Business Confidence Monitor

07/09/2017

Top ranking business professions running all types of businesses across the UK expressed their deep concern over business prospects in the latest ICAEW Confidence Monitor report. There are however, signs of optimism for an improvement by the next quarter.

Most likely fuelled by the outcome of the general election and the start of Brexit negotiations, the research shows a dramatic shift in opinions since the start of the year. The previous quarter’s report showed a shift into positive confidence across all types of businesses after a long period of negative opinion, so it is disappointing to see the trend reverse.

Economic concerns

Economic figures underlying the change include further increases in input prices (the cost of making goods or delivering services), over capacity (reported in 51% of businesses surveyed) and weak official figures for trade and industrial production. Concerns over interest rates, the global marketplace, and the shortage of suitable employees below management grade have also been factors.

A brightening perspective

Recent improvements in the strength of sterling has had a positive impact on input prices. The increase in the cost of producing goods and services is expected to slow in the next 12 months, relieving pressure on profits. Consumers will welcome this, as higher costs have been driving price increases, leading to a prediction that sales growth will remain modest for the rest of the year.

The wider business arena brings hope for optimism also. Interest rates now look likely to remain on hold allying fears over the rising cost of investment funding. The global picture is also looking brighter with economies growing more strongly than expected and concerns over trade wars declining, the uncertainty over the import-export market has lessened.

Expectations of capital expenditure is also higher than it was 12 months ago, indicating that investment in business improvement and renewal is back on the agenda – albeit rather cautiously.

We have summarised these and other predictions in an infographic, for ease of reference.

For help and advice on planning your business finances, contact Adrian Le Roux.

The ICAEW Business Confidence Monitor is based on telephone interviews with 1,000 members of the Institute of Chartered Accountants in England and Wales (ICAEW) who work in industry and commerce.