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Economic Insight

ICAEW Business Confidence Monitor (BCM): Yorkshire & Humber

Q2: Business sentiment in Yorkshire & Humberside has fallen sharply and is now in negative territory

The latest Business Confidence Monitor (BCM) shows business sentiment plunging into negative territory. Companies expect domestic sales growth to slow, and they face a range of challenges, during a period of rising interest rates and high inflation.

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 27 March 2023 to 23 June 2023.

  • The Business Confidence Index for Yorkshire & Humberside has weakened considerably since the previous quarter and is now negative: the only region, along with London, where that is the case.
  • Although there has been healthy domestic sales growth, comparing favourably with the UK average, companies in the region expect this to ease. Exports, however, are predicted to pick-up a little.
  • Multiple challenges are affecting businesses. Customer demand is the most prominent issue but there is growing concern over regulatory requirements and the tax burden.
  • Companies are expanding their workforces and intend to continue doing so at a similar rate in the year ahead. Salary growth is running at record rates, with businesses predicting a slowdown in the coming 12 months.
  • Input price inflation is rising at the fastest pace since the survey began in 2004, but is expected to ease considerably in the coming year. Higher selling prices, combined with rising sales, mean profits are expected to rise.
  • Increases in capital investment will be muted over the next year, and plans to raise Research & Development (R&D) budgets are also subdued, although somewhat stronger than for capital investment.

Business confidence in Yorkshire & Humber

The Business Confidence Index for Yorkshire & Humberside has deteriorated considerably in Q2 2023, bucking the national trend, and now stands at -0.6, having been +13.5 in the previous quarter. London is the only region with weaker sentiment, and indeed these are the only two regions where business confidence is in negative territory. Confidence has been hit by a range of difficulties, including high inflation and rising interest rates.

Domestic sales and exports growth

Domestic sales have been strong in the year to Q2 2023, rising by 5.7%, notably above the UK average (4.9%) and twice as high as the historical norm for the region (2.8%). Without that, confidence would almost certainly have fallen further. However, businesses expect the pace of increase to slow in the next 12 months, to 4.7%.

Export growth in Yorkshire & Humberside has been weak, at 1.5% year-on-year in Q2 2023, but companies expect an uptick over the next year, with the rate reaching 3.2%. Although that is weaker than in any other UK nation or region it would, if achieved, be above the historical average for Yorkshire & Humberside.

Business challenges

A wide range of challenges are impacting businesses. Customer demand remains the most prominent issue, cited by 41% of companies ‒ higher than in any other UK nation or region. Regulatory requirements are also growing as a problem, reported by 40% of businesses, making it the second most widespread concern in the region. Issues around the tax burden have also become more widespread (38%), higher than in all other UK nations and regions, and considerably above the historical average for Yorkshire & Humberside. 

Labour market

Companies plan to raise staff levels at around the current rate over the next 12 months, by 2.2%, comparing favourably to the rate of increase that, historically, the region has tended to achieve. Salary growth has reached a record rate, at 4.4% year-on-year in Q2 2023, which is more than twice the pace of the historical average for the region. Businesses do, however, expect wage increases to moderate, to 3.3%, in the year ahead.  

Input price, selling prices and profits growth

Cost pressures continue to build for companies in the region, driven initially by high energy and commodity prices, but now boosted further by more generalised wage and price rises. As a result, annual input price inflation in the region is running at its fastest rate since the survey began in 2004, at 6.7% in Q2 2023. This is faster than in most other UK nations and regions, probably reflecting the importance of Manufacturing in the region’s economy, including some sectors with high reliance on imported crude materials, the prices of which are still above historical norms. However, businesses expect their input cost increases to slow considerably in the coming year, to 3.4%, bringing the rate closer to historical norms and closely in line with the UK average (3.6%).

The prices charged to customers are also rising at their fastest rate since the survey began, at 4.8% in the year to Q2 2023. As input price inflation weakens, businesses expect to moderate selling prices to 3.1% in the year ahead.

As both domestic sales growth and input price inflation ease, so too will profits growth, although only slightly. Companies expect profits to increase by 4.2% in the next 12 months, down from the current rate of 4.8%, making that the weakest expectation of any UK nation or region.


Companies have increased their capital spending by 3.6% in the year to Q2 2023, faster than in any other UK nation or region, and considerably more than the historical norm for the region (2.0%). Businesses expect the pace of growth to plunge over the next 12 months, making the region the weakest performer in terms of planned increases across the UK. In contrast, companies intend to raise R&D budgets at a faster rate in the next 12 months than in the previous year, although growth is still expected to be fairly muted.