ICAEW.com works better with JavaScript enabled.
Economic Insight

ICAEW Business Confidence Monitor (BCM): Yorkshire & Humber

The Business Confidence Index is negative and lower than all other UK regions

The latest Business Confidence Monitor (BCM) shows business confidence falling further. Difficult economic conditions continue, though there has been some easing in the political turmoil of the previous period, which seriously unsettled financial markets. As a result, some economic stability has been restored, even though September’s events have resulted in higher interest rates, taxes and government borrowing, and lower government spending. But the global economic background continues to look very challenging.

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 interviewing is continuous, the latest findings are based on the period 17 October to 16 December 2022.

  • The Business Confidence Index has weakened further in the latest survey and Yorkshire & Humberside has the lowest reading of any UK nation or region.
  • Domestic sales growth is among the slowest across the UK. Export growth has shown some improvement over recent quarters. However, it is expected to soften over the next year, in contrast with the UK outlook.
  • The availability of non-management skills and staff turnover are more widespread challenges than in any other UK nation or region. Issues surrounding bank charges and the tax burden are becoming more prominent.
  • Difficulties with recruitment partly helps to explain why employment growth is slower than the UK average. Businesses are trying to tackle this by lifting salaries sharply.
  • Annual input price inflation is rising at the fastest pace since the survey began. Profits growth remains positive but continues to weaken.
  • Growth in capital investment is expected to slow considerably over the next 12 months. Research & Development (R&D) budget growth is very weak when compared to the UK average, and only a modest improvement is planned.

Business confidence in Yorkshire & Humber

The Business Confidence Index for Yorkshire & Humberside stands at -30.9 in the latest survey period, the lowest recorded reading for the region since Q2 2009. This means that, on balance, companies in the region are more downbeat than in any other UK nation or region.

Exports and domestic sales growth

Businesses have seen domestic sales rise over the past year, but when placed in the context of the UK, sales growth has been underwhelming. Annual domestic sales growth of 5.1% is the second weakest across the UK, behind only businesses in the West Midlands. In the year ahead, companies anticipate a slightly faster rate of growth of 6.0%. More positively, export growth has been improving, and has reached 4.5%. Only businesses in Wales and London are surpassing this. It is possible that 2022’s decline in sterling has helped to lift export sales. In the year ahead, however, businesses in the region forecast a more modest rise of just 3.3%. This expectation of a slowdown in export performance contrasts with the UK picture, in which export growth is forecast to strengthen.  

Business challenges

The range of challenges businesses in Yorkshire & Humberside face is probably weighing heavily on company sentiment. Supply-side problems remain the most prominent issues, with staff turnover (49%) and the availability of non-management skills (46%) both more widespread issues in the region than in any other part of the UK. Both continue to be widespread problems in Manufacturing & Engineering, a sector that has a large presence in the region.

As well as this, financial challenges are also coming to the fore. Bank charges are now a growing challenge for 22% of companies, the highest rate of incidence in the region since Q4 2010. The tax burden has also become a more prevalent issue. In the latest survey period, 29% of businesses are being challenged in this area. This is the highest proportion since the start of the survey in 2004, and is also more elevated than in any other UK nation or region, with the exception of the South East.

Labour market

Against a backdrop of recruitment difficulties, businesses in Yorkshire & Humberside have expanded their workforce only modestly. Employee numbers are up by 2.4% compared with a year ago, the second slowest rise behind the West Midlands. Weaker still is the outlook for the 12 months ahead. Employment is forecast to increase by 1.4%, with only companies in the West Midlands and Scotland having more subdued plans.

One way in which businesses are trying to tackle their recruitment problems is by sharply increasing pay levels, although high inflation is also driving salaries upwards. These are up by the joint fastest rate (along with the East of England and the North West) across the UK. And a very similar increase is planned for the year ahead.

Input and selling prices, and profits growth

Over recent quarters, businesses in Yorkshire & Humberside have faced stronger input cost pressures than those in most other UK nations and regions. And this remains true in the latest survey period. Against a backdrop of ongoing supply-side disruptions, particularly in the region’s large chemicals sector, and elevated commodity prices, input price inflation stands at 6.2%. This is a faster rate than the UK average, and is the sharpest rise in the region since the start of the survey in 2004. Admittedly, the pace of input cost rises is expected to ease slightly to 5.4% in the 12 months ahead, but this is still the second strongest outlook across the UK, behind the North East. In turn, selling prices charged to customers are also rising at the fastest rate since the survey began: 4.6%. A further 3.7% rise is planned for the coming year, outpacing all other regions with the exception of the South West and the North East.

Rising selling prices means that profits growth does remain in positive territory. However, the rate of growth has eased considerably over the past year and now stands at just 2.3%. This is the second slowest rise across the UK, with businesses in the West Midlands reporting only a marginally slower rise. A marked improvement to 4.3% is forecast in the 12 months ahead, although historically businesses in the region have tended to overestimate their profits growth outlook.


The weakness in overall business confidence, combined with the modest rise in profits, helps to explain why companies are being cautious with their investment spending. A 3.0% increase in capital spending over the past year is below the UK average. And in the 12 months ahead, companies plan to markedly slow capital investment growth to just 0.7%. With the exception of the sharp declines during the pandemic, this would be the weakest rise in more than a decade. Growth in R&D is also subdued. A rise of 1.4% in the latest survey period is the second weakest outturn across the UK, behind only Scotland, and only a small improvement to 1.9% is expected in the year ahead. This weakness in both capital spending and R&D budgets is a worrying development, given the important role of both in enhancing productivity and, thus, making businesses more competitive in both domestic and international markets.