ICAEW.com works better with JavaScript enabled.

Business confidence in the North East is amongst the least negative in the UK

The Business Confidence Index in North East England is once again amongst the least negative in the UK, according to the latest ICAEW Business Confidence Monitor ™ (BCM). The region’s Q3 score of -1.0 is marginally down on the Q3 2018 score of +0.4, but well above the Q3 UK average of -10.3.

Domestic sales stable but exports starting to slow

Businesses in the region may be deriving some confidence from the stability of domestic sales growth which, at 2.8% in Q3 2019, is broadly similar to a year ago. However, despite being an export-orientated region, companies report slowing export sales in Q3 2019 to 3.1% year-on-year, from 4.1% 12 months ago.

This weaker exports growth does not, however, appear to be impeding profits, which are increasing by 3.4% year-on-year in Q3 2019, compared to 1.7% a year ago. This may be because of an easing of input price inflation to 1.8% in Q3 2019, which is now among the lowest in the UK. Businesses are also managing total costs by restricting employment growth to just 0.9%, down from 1.9% in Q3 2018.

Late payments a cause for concern

Whilst confidence levels in the region are less negative than many others in the UK, companies in the North-East – like all businesses across the UK – face a range of on-going challenges. According to the latest results for the region, regulatory requirements continue to be the most widespread issue, with 45% of companies expressing increasing concern over these.

However, the issues causing concern for businesses are not purely regulatory; the proportion of businesses in the region reporting late payments as a growing source of difficulty is now 26%, twice what it was a year ago.

More moderate investment

Growth across all forms of investment is slower than last year. Staff development budgets are rising by just 1.3%, compared to 2.3% a year ago, reflecting the more moderate increases in employment over the past 12 months. Slower still are capital investment and Research & Development budgets (R&D), which are expanding by 0.8% and 1.2% respectively, down from 3.8% and 2.8% in the previous year.

James Callaghan, Regional Director Northern, Yorkshire and Humber, said: “This is the third consecutive quarter that the region has reported an increase in confidence, albeit marginal, but the fourth quarter that the score has been in negative territory – this reflects that whilst there is, perhaps some optimism amongst businesses in the North-East, it is still tempered by on-going uncertainty regarding issues such as Brexit and its potential impact.”