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Economic Insight

ICAEW Business Confidence Monitor (BCM): South East

Q4: Business sentiment in the South East remains fragile, but shows some improvement

The latest national Business Confidence Monitor (BCM) for Q4 2023 shows a slight shift in sentiment within the quarter. However, the quarter-on-quarter improvement in sentiment is marginal, remaining broadly steady at a similar level over the last few quarters. Overall confidence continues to fall short of the pre-pandemic average.

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 17 October to 15 December 2023.

  • The Business Confidence Index for the South East edged slightly out of negative territory, suggesting sentiment remains fragile.
  • Annual domestic sales growth remains steady but export growth slowed considerably. Both are expected to accelerate in the coming year and will either match or exceed their historical averages.
  • Selling price inflation eased and further slowdown is expected, although it will remain high by historical standards. Profit growth has softened but is expected to strengthen in the year ahead.
  • Labour costs may have peaked but continue to increase, albeit more slowly than in recent quarters. Salary growth is expected to ease further as will input price inflation, although the latter will be among the highest in the UK.
  • Customer demand is now the most widely cited growing challenge and marketplace competition, bank charges and access to capital appear to have resurfaced as prominent issues.
  • Capital investment growth slowed and is expected to moderate further over the next 12 months. R&D budget growth is more favourable, with growth at a similar rate forecast in the coming year; faster than any other UK nation or region.

Business confidence in the South East

The Business Confidence Index for the South East rose out of negative territory, up from -2.9 in the previous quarter to +0.2 in Q4 2023. Despite moving into mildly positive territory, sentiment remains low by historical standards for the region and is among the most subdued across the UK.

Domestic sales and exports growth

At 4.6% in Q4 2023, annual domestic sales growth held steady at the rate achieved in the previous quarter, following a downward trajectory over recent quarters. However, businesses in the South East are more optimistic about prospects and anticipate the rate of increase will accelerate to 5.2% in the coming year. This is faster than the region’s historical norm and the anticipated performance for the UK.

Meanwhile, export growth slowed considerably in the year to Q4 2023 and is running at 2.5%. Although companies expect this to pick up in the next 12 months (3.3%), broadly matching the region’s historical norm, it is somewhat slower than the predicted rate for the UK (3.8%).  

Business challenges

Customer demand is now the most widespread growing challenge for the South East. In Q4 2023, 39% of businesses cited it as an increasingly difficult issue, bringing it in line with the region’s historical norm. However, several issues appear to have resurfaced in recent quarters and, of those, financial challenges related to bank charges and access to capital are particularly concerning. The proportion of businesses in the South East that report them as growing issues has been trending upward for several quarters, with each issue being flagged by 20% of businesses. This is roughly twice the region’s historical average. Competition in the marketplace has also become increasingly problematic for businesses, cited by 30% of businesses in the region.

While staff turnover and the availability of non-management skills issues are easing for businesses, they remain prominent challenges in the South East, with each reported by around one in four companies in the latest quarter.

Labour market

Employment expansion in the South East has eased somewhat in recent quarters though, at 1.9% in the year to Q4 2023, it is among the top performers across the UK. Companies also expect a similar pace of increase in the next 12 months, tracking the predicted national rate. 

Salary growth may have passed its peak in the region, with salaries now 3.8% higher than a year ago. While it is among the weaker rates of uplift across the UK, it is still notably ahead by historical standards for the South East (2.1%). Companies plan to further moderate these increases over the next year with expected salary growth of 3.0%, which is joint-lowest with London and the West Midlands.

Input and selling prices, and profits growth

Input prices continue to rise in the South East, although at a slower rate than in recent quarters. At 5.4% year-on-year in Q4 2023, the rate of increase is more than double the historic average for the region. Businesses in the South East do, however, anticipate further moderation in the year ahead (3.5%). Despite this, expected input price inflation is higher in the South East than in any nation and region in the UK, bar the North West.

The rate at which businesses in the South East are lifting their prices has cooled substantially and, at 3.7% in the year to Q4 2023, it is notably faster than historical standards for the region (1.2%). In the year ahead, companies anticipate raising their selling prices more slowly, at 2.9%, though this is ahead of the projected rate for the UK.

Linked to the above trends, profit growth has moderated to 3.3% in the year to Q4 2023, but companies forecast an improved performance in the next 12 months, to 4.6%, as cost pressures subside and sales pick up, matching the expectation nationally.


Annual capital investment growth eased to 1.9% in Q4 2023, with further slowdown expected in the next 12 months, to 0.8%. This is half the historical average for the region and lower than elsewhere in the UK aside from Wales, suggesting confidence, although marginally positive, remains fragile.

Businesses raised their R&D budgets more favourably and, at 2.3% in the year to Q4 2023, the rate of growth is ahead of the region’s historical norm. This trend is expected to be maintained over the next 12 months and the South East has the fastest predicted rate for R&D budgets growth in the UK.

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