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ICAEW Business Confidence Monitor (BCM): Yorkshire & Humber

Q3 2019: Confidence hit by subdued exports performance and growing challenges

Businesses in Yorkshire & Humber are among the least confident in the UK, with slowing exports and profits hindering sentiment. Against that backdrop, customer demand is now a more widespread concern for companies. And looking ahead, companies plan to restrict growth across all types of investment spending.

Business Confidence in Yorkshire & Humber

The Business Confidence Index for Yorkshire & Humber is one of the lowest in the UK: -21.6 in Q3 2019. A range of factors is likely to be hindering company sentiment, from continued Brexit uncertainty to the recent insolvency of British Steel, which has a large presence in the Scunthorpe economy, plus links to other parts of the region.

Exports and domestic sales

Company sentiment in the region may also be hampered by slowing export growth. In Q3 2019, exports expanded by 2.4% year-on-year, compared to 4.6% in the year to Q3 2018. That said, domestic sales growth remains stable at 3.6%, the same rate as the previous year. 

Inputs and profits

Companies in the region are also seeing a rise in inputs in goods and services from abroad of 3.8%, the fastest pace across all UK regions. This, combined with slowing exports growth, may be impacting the profitability of businesses. Annual profits growth stands at 2.1%, below the 3.1% rate of last year, and trailing the UK average of 2.7%. 

Labour costs

Given these difficulties, businesses are trying to manage costs in other areas, particularly those relating to employment. At 0.5%, the growth in headcounts in the year to Q3 2019 is the joint weakest in the UK. Businesses are also moderating annual total wage increases to 2.0%, compared to 2.4% a year ago. And growth in staff development budgets continues to exhibit a clear downwards trend. Businesses are increasing staff budgets by just 1.3% in Q3 2019 year-on-year, following an expansion of 2.7% last year. 

Business challenges

Given slower export growth, customer demand is now the most widespread challenge in the region, with 41% of companies citing growing concern over the issue in Q3 2019. Over a quarter (28%) of businesses now report late payments as a growing source of difficulty, up from 17% last year and the highest proportion across the UK. 


Despite these challenges, businesses are increasing their rates of investment. Research & Development (R&D) and capital investment spending are rising by 2.5% and 3.0% respectively, faster than the UK averages. 

Prospects for the next 12 months

Companies anticipate weaker domestic sales growth of 2.2% over the next 12 months, while exports are set to rise at a similarly modest rate (2.6%) to that of the past year. Moreover, businesses plan to moderate all forms of investment growth. Staff development budgets are set to rise by just 1.0% and R&D budgets and capital spending are forecast to increase at slower rates than in the past 12 months, at 0.9% and 1.6%.