Property and IT drive down confidence in London
Despite a small increase in business confidence across the UK, London is suffering from problems in the property and IT sectors, while late payments is a rising issue around the country, reports ICAEW.
London is the only region where confidence is lower in the current quarter than in the previous one. The ICAEW Business Confidence Monitor (BCM) found that confidence in the capital had fallen to -17, lower than the previous quarter (-13) though an improvement on the first three months of the year where confidence stood at -20.
This may be linked to the problems of the property sector, and to the decline in sentiment in the IT & Communications sector, both of which are important to the capital. Indeed, the two may be linked: some of the weakness apparent in London’s commercial office market is likely to be related to a softening in demand from IT & Communications, despite much publicised developments by the likes of Google and Facebook.
Business confidence in the UK as a whole is higher, on average, in Q3 than in Q2 2019, but there is a clear downward trend within the quarter. Political uncertainty at home, and a rising risk of a ‘No Deal’ Brexit, are almost certainly both reasons, but not the only ones.
Business confidence remains in negative territory, with the Confidence Index at -10.3 in Q3 2019. Although the average level is a little higher than in the previous quarter, the trend during the three months is firmly downwards, whereas in Q2 the trend within the quarter was upwards. As a result, business sentiment is now back where it was immediately after the Brexit referendum in June 2016.
However, ICAEW has also identified another important issue that will become an increasing worry in the upcoming months: late payments.
ICAEW found that one of the most widespread issues found is a rising proportion of businesses which report late payment as an increasing challenge for their performance compared to a year ago.
According to the latest BCM, late payments from customers are a greater challenge than a year ago for one in five businesses (20%). Six out of nine sectors (Property, Business Services, Manufacturing & Engineering, Construction, Retail & Wholesale, and Banking, Finance & Insurance) are experiencing this as a growing issue, while nearly a quarter (24%) of SMEs are also reporting this.
Regulatory requirements and customer demand also continue to grow as rising problems, with around two fifths of businesses reporting these as increasing challenges.
Michael Izza, ICAEW Chief Executive, said: “The Prime Minister has promised Brexit by 31 October and the overriding priority of his government must be to get a good deal. More than anything else that will give business the stability it is crying out for.
However, this feedback from our members, who advise businesses in every sector and level of the economy, reminds us that they face other challenges as well, many of which have little to do with Brexit such as late payments and the regulatory burden. Robust Government action on these issues could make a real difference to the business environment, especially for SMEs, and would help to restore confidence and momentum.
That would go some way to unlocking the economy and ensuring it is in the best shape to face the challenges and opportunities of life outside the European Union.
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