Businesses rattled as latest survey points to an economic slowdown
Business confidence has plummeted during the last few months due to severe volatility on the financial markets, the approaching EU referendum and the introduction of the national living wage, according to a new survey out today.
The latest confidence monitor from the Institute of Chartered Accountants in England and Wales (ICAEW) and Grant Thornton, fell to a reading of just 0.8 – where positive scores indicate optimism about the next 12 months – its lowest in four years and down from 11.4 last quarter.
The survey is just the latest which shows that the difference between the number of firms that think business will pick up over the next year and those that think it will shrink is finely balanced, raising fears that the UK business cycle is taking a turn for the worst.
Michael Izza, chief executive at the ICAEW, said: “Business confidence is fragile and there is an absence of resilience in the UK economy at the moment. A combination of factors has led to this negativity and includes the EU referendum, slowing domestic sales, Chinese growth slackening and the recent Budget.”
“Businesses are unable to raise prices by much but have had added pressure on costs with auto-enrolment and the national living wage. It is not surprising therefore that some companies are reticent to make significant growth investments at the moment,” Grant Thornton’s chief operating officer Robert Hannah added.
In the capital, a sharp deterioration in the outlook of banks, insurers, and property firms meant that confidence in London actually sunk into negative territory. The City’s financial services firms along with housebuilders and estate agents are anticipating a slowdown over the next 12 months.
Read more: Business confidence falls to lowest level since 2012
Manufacturing proved a bright spot, however, as both the ICAEW report and the latest survey among small and medium-sized companies from the CBI showed manufacturers had a more positive outlook on the economy than those in other sectors.
One-third of smaller manufacturers took on staff during the first three months of the year, compared to just 16 per cent that cut the size of their workforce, according to the CBI. More firms also said they were going to increase capital investment than those that were planning to scale back, and the balance of manufacturing companies expecting output to increase in the second quarter of the year came in at 17 per cent.