Business confidence at highest for two years – but how fragile?

Home Business confidence at highest for two years – but how fragile?

Business confidence at highest for two years – but how fragile?

Business confidence is at its highest in two years, according to our latest ICAEW Business Confidence Monitor – which also reports that regulation and staff turnover are currently perceived as two big challenges.

Here, then, are key findings for Q2 2018:

• Confidence is on the up again, ‘with an increase from -1 in Q1 2018 to +7 – its highest level in two years’, says the press release

• Export and domestic sales are growing, but companies that export are ‘more confident and showing stronger sales that those that do not’

• Overall, profits have grown by 4 per cent over the last year, and similar is expected next

• Increase in confidence spans all sectors, company sizes and regions

Regulation and staff turnover

‘Regulation is the biggest challenge facing businesses’, says the release, ‘as new legislation impacts on companies’ – not least, the Gender Pay Gap and General Data Protection Regulations.

‘With further legislative changes with Brexit this is only expected to worsen.’

And staff turnover is also causing difficulty, especially in the construction and business services sectors, ‘who employ large numbers of migrant labour’, says the release.

Fragile joy?

Here’s Michael Izza, ICAEW Chief Executive:

‘There is definitely a sense of ‘the joy of spring’ in this quarter’s figures with confidence rising across most regions and sectors.’

But he also calls the confidence ‘fragile’.

‘Long term investment, although improving, is still modest and given the lack of certainty about the future, businesses are more focussed on the ‘here and now’. Confidence is very fragile and the upward trend could be derailed by any setback in the economic outlook.’

So, a delicate balance.

Exporters more confident

Also, the differences between businesses that export and those which don’t is quite pronounced.

‘Since the EU referendum vote in June 2016 evidence of a gap in confidence has emerged between companies that export and those that do not’, says the press release.

‘This quarter it stands at +12.4 for those that export and +1.7 for those businesses that rely on domestic sales. Companies that export have been seeing stronger sales growth of 5.2% and many expect this trend to continue encouraged by progress in Brexit negotiations.’

However, will it? We’ll have to see – given ‘recent fluctuations in sterling’.

There’s more. See the full press release here.

Photo by Stephane YAICH on Unsplash

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