A recent study of businesses across all sectors and regions by accountant Bishop Fleming shows a bounce back in confidence after Brexit.
The firm’s latest Business Barometer reveals that while three out of five (56%) business owners remain doubtful about the year ahead, this was an improvement on three months ago when over two thirds (68%) expressed doubts, and is almost back to where we were pre-Brexit where just over half (54%) were having doubts.
This small bounce back in confidence was welcomed by the firm, though it was noted the turn-around did not translate into improved recruitment plans – with half of those surveyed planning no new recruitment in the next year.
Matthew Lee, Bishop Fleming’s managing partner, said: “The vote for Brexit hit business confidence.
“And although it has bounced back, uncertainty continues to affect recruitment decisions. Such decisions are made even more difficult by Brexit potentially deterring skilled overseas workers from coming to the UK, as well as this country’s general lack of investment in training and development to reduce the skills gap. Firms also remain worried about the Living Wage and forthcoming apprenticeship and migrant skills levies.”
A third of businesses surveyed continue to expect no rise in sales in the next 12 months, reflecting growth inertia in some parts of the economy.
Lee added: “Consumer demand was undoubtedly knocked by Brexit, and certain industry sectors continue to struggle. This is concerning where staff costs are rising and margins are squeezed because volumes cannot be raised or prices increased. This suggests there could be a rise in business insolvencies next year and in 2018.”
However, mirroring the recovery of business confidence, two thirds (65%) of those responding to the survey confirmed they were now planning an increase in investment in their business in the next 12 months. This is a small rise from the pre-Brexit survey which showed three fifths (57%) were planning to invest.
Lee said: “This small rise in investment intention is encouraging, though we have seen some scaling back of capital spending. I remain concerned that firms are not investing enough for the future, particularly when borrowing costs remain at record lows.”
On the international front, those businesses in the survey with overseas trading interests revealed an increased expectation of improved trade (40%) compared with the pre-Brexit position (35%), albeit a small change. Three out of five companies expect the fall in the pound’s value against major currencies to have a negative effect on their trade, reflecting the fact that we import more than we export.
Lee commented: “The fall in the value of the pound has made UK goods and services cheaper for overseas customers, but it creates price inflation for imports. We do need our companies to think big and start to export more.”
He added: “I remain concerned over the slowing Chinese economy and the massive debt problems in the Eurozone and how these factors will impact on our trade. We have also yet to understand the effects on the UK economy of a Trump presidency and his stated aim of substantially reducing tax rates; which could put the UK and US in direct competition with each other for attracting new investment.”
He continued: “Overall the survey reveals that whilst there has been some bounce back in confidence and a greater willingness to invest, business sentiment remains fragile. In the Autumn Statement we need to see the new Chancellor ‘reset’ the economy with fiscal stimulus to boost investment and consumer demand.”