The latest national Business Confidence Monitor (BCM) for Q2 2024 shows a sustained increase in confidence and is now at its highest level for two years, as businesses expect falling input price inflation to support further growth in demand and improved profits in the year ahead.
The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 15 April to 22 June 2024.
- Sentiment improved for the third consecutive quarter in Q2 2024, with the Business Confidence Index reaching +22.4, the highest of all regions and well ahead of the historical average (+4.3).
- Domestic sales growth expanded and, while exports growth dropped slightly, it was still the highest across the UK and businesses expect further improvements to both.
- Positive sales results were likely helped by the region’s favourable economic environment, enjoying one of the lowest rates of input price inflation and easing salary growth, enabling profits growth to continue to expand.
- Regulatory requirements are the most widespread concern in the East of England. However, customer demand and competition in the marketplace continue to be prevalent.
- The investment picture in the region is mixed. Capital expenditure growth has eased and companies anticipate a further slowdown. However, the growth in R&D budgets has been relatively strong and businesses plan to maintain growth in line with the historical norm.
Business confidence in the East of England
Viewing on a mobile device
For a detailed view of the charts, please rotate your device.
Business sentiment grew for the third consecutive quarter in Q2 2024, with the East of England’s Business Confidence Index reaching +22.4, the highest of all UK regions and nations, and ahead of the UK average (+16.7). The latest reading is five times higher than the historical average (+4.3) as businesses expect falling inflation to support growing sales. Supporting this high level of confidence, the region has a high proportion of economic activity in sectors reporting above average levels of sentiment in the latest quarter, including Construction (+23.1) and Transport & Storage (+20.9), with the latter covering Stansted Airport and activity in and around the major port in Felixstowe.
Domestic sales and exports growth
Domestic sales continued to grow in Q2 2024, expanding by 3.6%, above the region’s historical average of 3.1% and the national average of 3.3%. But while companies expect domestic sales to continue to grow over the next year by 4.6%, this will be one of the lowest rates of all regions and nations, below the expected national average of 5.3%
Export sales experienced a slight slowdown in Q2 2024, growing by 4.3% compared to 5.1% in the previous quarter. Yet the latest export sales growth rate was the highest of all UK regions and nations, and above the region’s historical average and the national average (both 3.0%). Businesses are optimistic that this favourable trend will continue, with growth expected to reach 5.6% over the next 12 months and likely supported by the strong export growth anticipated in the Transport & Storage sector next year (5.5%).
Business challenges
Close to half (46%) of surveyed businesses in the East of England reported regulatory requirements as a growing issue in Q2 2024. Although this was already the most widespread growing issue in Q1 2024, the proportion of businesses citing this specific challenge increased in the latest quarter. Customer demand and marketplace competition also remain prominent concerns, suggesting an underlying fragility to trading conditions.
Some labour market issues continue to be a concern for East of England businesses, with 29% reporting staff turnover as a growing issue, below only the North East (31%). Skills shortages, including the availability of management and non-management skills, was reported by 18% and 22% of businesses respectively, both elevated compared to their historical norms.
Labour market
Recent strong domestic sales and rising confidence in the East of England is supporting recruitment in the region. Employment grew for the second consecutive quarter in Q2 2024, with growth of 2.4%, the second highest rate in the country after Wales. However, businesses plan to slow over the next 12 months to 2.1%, although this will remain above the national average.
But strong labour demand might be impacting salaries, as high rates of wage inflation have been slow to dissipate. In Q2 2024, wages expanded by 3.7%, in line with the national average but above the region’s historical average of 2.2%. The gradual downward trend is expected to continue over the next year, with businesses anticipating wages growth to slow to 3.1%, marginally below the national average of 3.2%.
Input and selling prices, and profits growth
Input price inflation has fallen fairly consistently since Q1 2023 and the rate fell sharply to 3.8% in Q2 2024, from 5.4% in the previous quarter. The East of England now has the second lowest rate of input price inflation across all parts of the UK but, as is the case elsewhere it is still high and remains above the historical average of 2.6%. Businesses anticipate input price inflation to soften further in the next 12 months, to 3.0%.
The slower growth in input prices was finally reflected in the growth of selling prices. After reaching one of its highest growth rates in 20 years in the last quarter, prices growth in the regions eased to 3.0% in Q2 2024, below the national average of 3.2%. Companies expect the slowdown to continue next year.
The combination of improved sales, easing prices inflation and more moderate salary growth, helped to lift profits growth for East of England businesses to 3.5%. This is a marked increase from Q1 2024 (2.7%) and above the historical average (3.0%). Businesses are optimistic that profits growth will accelerate to 5.3% in the year ahead, only marginally below the projected national average of 5.5%.
Investment
Capital investment grew by 2.1% in the 12 months to Q2 2024, a slight decline compared to the previous quarter (2.8%). Capital investment growth was also below the national average of 2.3%. Despite East of England’s businesses being the most optimistic about the future, they plan to slow their capital investment growth to just 1.1% over the next 12 months.
Meanwhile, growth in R&D budgets decelerated slightly, reaching 2.5% in Q2 2024, but still ranking as the second highest increase of all regions and nations after Yorkshire & Humberside. R&D budgets growth is expected to continue to soften in the next year to 2.1%, while remaining one of the highest rates in the country.
