ICAEW Business Confidence Monitor (BCM): Yorkshire & Humber
Q4 2019: Weaker sales performance and rising business challenges
Company confidence remains negative in Yorkshire & Humberside. Against a backdrop of Brexit uncertainty, companies report slower sales and profits growth. Given these difficult market conditions, customer demand and late payments are also growing sources of difficulty. And businesses are restricting investment spending, with further moderations to growth planned for the next 12 months.
Business Confidence in Yorkshire & Humber
The Business Confidence Index for Yorkshire & Humberside stands at -19 in Q4 2019, meaning that company confidence has now been firmly negative in each of the last six quarters. As elsewhere in the UK, company sentiment is probably being hindered by continued Brexit uncertainty.
Exports and domestic sales
As well as political factors, business confidence may be suppressed by slowing domestic sales and exports growth. The former are rising by 2.0% while the latter are up by 2.4%, both considerably lower than 5.2% and 3.5%, respectively, a year ago. Weaker sales performance may also be associated with the high proportion of companies operating below capacity in the region. At 62%, this is the joint highest in the UK.
Input and selling prices, and profits
Input price inflation of 2.5% is among the highest in the UK and significantly outpaces the selling price rises of 1.4% that businesses have been able to achieve over the past year. Rising costs combined with slowing sales appear to be impacting the profitability of companies. Profits are up by just 1.2% in Q4 2019 year-on-year, compared to 2.7% 12 months ago.
A range of other challenges are apparent for companies in the region. Tough financial conditions may be reflected in the 28% of companies that report late payments as a more pressing issue, among the highest in the UK. And given the weakness in sales growth, the proportion of companies that cite customer demand as a growing source of difficulty is slightly up from a year ago.
In terms of investment, growth across all forms of spending is exhibiting a downwards trend in recent quarters, with capital spending and Research & Development (R&D) rising by just 1.8% and 1.7%, respectively, both down on a year ago.
Prospects for the next 12 months
The weakness in confidence appears to be impacting projections for the year ahead. Domestic sales growth is expected to improve marginally to 2.3%, while little growth is forecast for exports (0.4%). Given these muted sales expectations, businesses also plan to restrict employment growth in the year ahead. Employment is expected to increase by just 0.8%, following modest growth in the past 12 months of 1.1%. Companies also plan further moderations across all types of expenditure, with capital investment and R&D spending expected to remain broadly similar to their current levels.