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ICAEW BCM: business confidence boosted by vaccine rollout

18 February 2021: Chartered accountants are confident sales will grow and employment will rise over the next 12 months as the COVID-19 vaccine rollout picks up pace, according to new research from ICAEW.

While companies in the UK continued to suffer year-on-year declines in domestic sales (2.2% in Q1 2021), the majority of chartered accountants are hopeful of a return to sales growth (5.2%) in 2021 if the pandemic is contained, according to ICAEW’s Business Confidence Monitor (BCM) for Q1 2021.

The regular survey of 1,000 chartered accountants covering a range of UK sectors, regions and company sizes found that business confidence was back into positive territory in Q1 2021. Despite the impact of restrictions on trading, the report suggests that news of vaccine approvals and its subsequent rollout has lifted their expectations for the year ahead.

In addition to a contraction in sales, businesses also experienced a decline in profits (-3.1% lower in Q1 than a year ago). As a result of weaker sales and profits, businesses reported the fastest employment fall for a decade, as they reduced headcounts to economise. However, companies said they were planning to increase employee numbers in the coming year by 1.4%.

“Rising confidence among businesses is an encouraging sign of things to come and a predicted growth in employment is good news for people who have lost their jobs over the past year”, said Michael Izza, ICAEW Chief Executive.

The findings come after last week’s publication of ONS figures, which showed that the UK economy shrank by 9.9% in 2020, more than twice as much as the previous largest annual fall on record.

Izza added: “The past year has been an unparalleled struggle for business, but the mass rollout of a vaccine and the UK-EU trade deal have provided the foundations for a recovery in 2021.”

Sales outlook – all regions expect a rebound

Companies across all regions of the UK expected domestic sales to rebound this year. The West Midlands was tipped to bounce back strongest, with the possibility that pent-up demand in the region’s car manufacturing and consumer goods sectors could drive sharp growth in exports and domestic sales in 2021.

Confidence among businesses grew in most regions and nations of the UK, the report found. It was highest in the South East, the only region where businesses did not report a contraction in sales over the past 12 months. In Yorkshire and the Humber business confidence remained negative, in contrast to the rest of the UK.

Meanwhile, businesses in the Transport & Storage sector took the greatest hit to their sales year-on-year. Nevertheless, businesses in all sectors expected their sales to increase in 2021.

Harsh trading conditions – late payments are a rising challenge

Customer demand remains the most reported growing challenge. Even if domestic sales and employment did recover as expected, they would likely remain well below pre-pandemic levels, the report stated. 

Meanwhile, one in three businesses cited late payments as a rising difficulty, a reflection of the pressure placed on company cashflows by the pandemic. This was reflected in the study, where 32% of respondents flagged late payments as a rising challenge, up from 18% in Q1 2020.

The results also highlighted that 23% of participants reported transport problems as a growing challenge while expanding into new markets. This issue is widely cited by businesses as a growing difficulty, reflecting the impact of travel bans and delays at ports. Problems with regulatory requirements were also highlighted as an increasing challenge for businesses, the report found.

Budget focus – job creation and export support

In a separate pre-Budget pulse check survey, ICAEW members called for a focus on jobs and exports to create a bridge through to economic recovery in the summer and beyond, with the statement used to support businesses, help exporters, and get people back to work.

Commenting on the survey Iain Wright, ICAEW’s Director for Business & Industrial Strategy, said that while chartered accountants recognise that public finances will need to be repaired, “2021 is not the right time for major changes to taxes: business is coping with COVID-19 and changes to our international trading relationships – it just can’t afford further disruption at such a precarious time in the economy.”

The Business Confidence Monitor (BCM), which began in 2003, surveyed 1,000 Chartered Accountants based in the UK by telephone between 19 October 2020 and 15 January 2021. 

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