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Boris boost to business confidence

Monday 3 Febuary 2020. Business confidence has returned to positive territory in the first quarter of 2020 after being at its lowest level for a decade at the end of 2019, according to a new survey published today by chartered accountancy body ICAEW.

ICAEW’s Business Confidence Monitor (BCM) for Q1 2020 shows confidence standing at 1.3, the first time it has been positive since Q2 2018. This is a marked improvement on the Q4 2019 confidence measure of -20.6, the lowest result in ten years, and is the largest quarterly movement in confidence since the UK exited the last recession in 2009.

Possible reasons for the boost include the decisive General Election result providing greater clarity on the first stage of Brexit, as well as pledges from politicians to end austerity and increase investment in infrastructure and the regions.

However, the report warned that the underlying economic position was challenging.

Michael Izza, ICAEW Chief Executive, said:

“Businesses are feeling more confident about the future now the political deadlock has ended. But while some uncertainties have eased, much remains unknown around future trade agreements and regulatory alignment.

“It’s essential that businesses are supported through the transition period, and we want to see the government negotiate a free trade agreement that maximises market access for goods and services, and avoids unnecessary bureaucracy for business.

“Creating the right environment for British businesses to prosper long-term means boosting skills, fixing late payments and improving access to capital. The new majority government has indicated that it will use the Budget next month to boost investment and level up regional inequalities. We hope this includes pro-business measures such as tax grants and plans to increase productivity, so we can look beyond Brexit to critical domestic issues.”

The research also highlighted:

  • Caution over investment
    Businesses expect slightly stronger growth over the next 12 months but remain cautious about how much they will invest in their businesses over the same period.
  • Growing concerns over regulation
    Concerns over regulations remain the most commonly-cited challenge, and will be a factor to watch during trade talks this year.
  • Biggest boost in the construction sector
    The sectors which moved most into positive levels from the previous quarter were the construction sector, which moved from a confidence level of -22.6 to +14.5, the energy, water and mining sector which moved from -18.4 to +7.6, and transport and storage, which moved from -27 to +5.5 this quarter.
    Possible reasons for this include the political pledges on infrastructure investment and fears around nationalisation of public services easing with the election of a Conservative government.
  • Stock levels now almost normal
    Stock levels fell back towards normal as anxieties around a no-deal Brexit eased.
  • Skills shortages remain
    Skills shortages remained a problem for businesses and became more widespread over the past decade. Almost a quarter (23%) of businesses this quarter say that the availability of non-management skills has become a greater challenge to their organisation’s performance compared to the last 12 months.
  • Productivity
    Only 39% of companies said productivity had increased during the previous year. This was likely related to continued low investment growth, the report said.

ICAEW’s members run and advise more than 3 million businesses across the UK. The BCM survey of 1,000 business members is one of the largest and most comprehensive quarterly reviews of UK business confidence, and is a credible predictor of GDP and economic change.

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