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.
- Sentiment in Yorkshire & Humberside slipped slightly into negative territory but has been largely subdued over recent quarters.
- Domestic sales growth is broadly stable and growing ahead of the historic norm, while export performance has suffered and exports failed to grow meaningfully in the latest quarter. Performance on both measures is expected to improve over the coming 12 months, but exports expectations lag other parts of the UK.
- Input inflation may have passed its peak and, though it remains elevated by historical standards, is expected to fall further. Salary growth has stabilised and companies anticipate a similar rate will be maintained over the coming year.
- Selling price inflation has eased, while profit growth has remained fairly steady compared to the previous quarter and is expected to pick up in the year ahead.
- Customer demand continues to be the most widespread growing challenge, and the availability of non-management skills is a major source of difficulty. Both are more prevalent in Yorkshire & Humberside than elsewhere in the UK.
- Capital investment spending is broadly steady and R&D budgets are largely unchanged. Businesses anticipate modest improvements in both over the next 12 months.
Business confidence in Yorkshire & Humber
The Business Confidence Index for Yorkshire & Humberside has been largely subdued over recent quarters, though it dipped slightly into negative territory in Q4 2023. With sentiment down from +3.2 in the previous quarter to -0.4, companies in the region are among the most subdued in the UK.
Domestic sales and exports growth
At 3.1% in Q4 2023, annual domestic sales growth held broadly steady around the rate achieved in the previous quarter, following a downward trajectory over recent quarters. However, businesses in Yorkshire & Humberside are more optimistic about future domestic sales growth than most nations and regions in the UK, anticipating that the rate of increase will accelerate to 5.8%.
Meanwhile, export performance continues to soften and has showed little growth in Q4 2023, with the region only managing growth of just 0.1%. Companies forecast the rate of increase to pick up in the coming 12 months to 2.7%, matching the historical average for the region. However, Yorkshire & Humberside is the weakest performing area for exports growth in the UK, both in terms of recent outturn and projected growth.
Business challenges
Customer demand remains the most widely cited growing challenge in Yorkshire & Humberside, reported by 44% of businesses in the latest quarter. Indeed, it is more prominent in the region than elsewhere in the UK and is somewhat more pressing compared to the region’s historical average. It is closely followed by regulatory requirements, cited by 38% of companies in the region as a growing issue.
The availability of non-management skills remains a major source of difficulty, flagged by one in three companies in Yorkshire & Humberside, and more so than any other nation and region in the UK. A similar proportion of businesses also report the tax burden as a growing concern, which has been on a rising trend over recent quarters and is now twice the historical average for the region.
Labour market
Employment growth in Yorkshire & Humberside has cooled in recent quarters, dipping to 1.3% in the year to Q4 2023. This is a notable slowdown from the previous quarter (2.0%) and puts the region among the UK’s weaker performers. Companies anticipate a similar pace of labour force expansion over the next 12 months.
Salary growth has stabilised over recent quarters but, at 4.1% year-on-year in Q4 2023, it is almost twice the region’s historical average and near record rates. In the year ahead businesses plan to increase salaries at around the current rate and somewhat faster than the projected UK rate.
Input price, selling prices and profits growth
Input price inflation may have passed its peaked in the region, but while it has edged down from its record high in Q3 2023, it remains elevated by historical norms. At 4.9%, year-on-year in Q4 2023, the rate exceeds the historical average of 2.6%. Businesses are optimistic that cost pressures will ease considerably over the coming year, with input prices expected to rise by 3.2% in the next 12 months ‒ broadly in line with the predicted rate for the UK.
Companies in Yorkshire & Humberside continue to lift their selling prices. At 3.7% in the year to Q4 2023, selling price inflation has eased for the second consecutive quarter, and is expected to moderate further in the coming year to 2.4%. Despite this, the projected rate is high by historical standards.
Profits growth has remained largely unchanged from the previous quarter, up 2.1% in Q4 2023 from a year ago. Businesses expect profits growth to accelerate over the year ahead, to 5.0%, which is more than the UK average (4.6%).
Investment
The overall investment picture in Yorkshire & Humberside is relatively weak. Growth in capital investment spending remains broadly stable at the rate achieved in Q3 2023 and, at 1.6% in the year to Q4 2023, it is somewhat below the region’s historical norm (2.0%). However, companies expect the rate of increase will improve, reaching 2.2%, over the next 12 months.
Meanwhile, R&D budgets remain largely unchanged from a year ago, growing by only 0.1%. And while companies anticipate a pick-up in performance, to 0.6%, in the coming year, it remains markedly slow compared to the region’s historical standards.
