The latest Business Confidence Monitor (BCM) by the Institute of Chartered Accountants in England and Wales (ICAEW) has revealed a significant surge in business confidence across the UK ...
The findings from ICAEW's BCM Q2 report underscore the resilience of UK businesses!
The promising economic outlook, characterised by lower inflation and optimistic sales projections, sets a robust stage for the new Labour government to drive economic growth as pledged in their manifesto.
According to the quarterly BCM survey, which canvasses the opinions of 1,000 chartered accountants across the UK, the confidence level reached 16.7 in the second quarter of 2024, up from 14.4 in the previous quarter!
This marks the third successive quarterly rise and the highest level since the first quarter of 2022, more than doubling the pre-pandemic average of 7.2. The uptick in confidence reflects businesses' ability to overlook distractions caused by the general election and focus on favourable economic conditions.
The BCM highlights sector-specific variations in confidence. The financial services and energy, water, and mining sectors are most optimistic, buoyed by improved economic conditions. However, manufacturing and engineering businesses are less confident, hindered by pessimism regarding domestic and export growth and profit expectations for the coming year. Notably, only companies in the retail and wholesale and property sectors experienced a drop in confidence during Q2.
The rise in business sentiment can be linked to weaker input cost inflation, which has led to stronger profit growth and positive sales projections both domestically and internationally. The BCM reports a fourth successive quarter of slowing input cost inflation in Q2, allowing businesses to maintain competitive pricing without compromising profits.
"Despite the positive outlook, there are concerns about the UK's recovery!"
The ICAEW cautions that the current economic growth is built on 'rather shaky foundations' due to muted investment activity indicators. The BCM suggests that while the economy is on track for continued growth in the second quarter, there is a need for stability and continuity to foster long-term growth.
The BCM also reveals that almost half of businesses experienced cost increases due to the National Living Wage hike, with one in five raising prices to cover these costs. Companies also responded by improving efficiencies, closing pay gaps, and increasing staff upskilling.
Regulatory concerns have reached a four-year high with two-fifths of companies citing this as an increasing challenge in Q2. This is most pronounced in sectors like energy, water, and mining (61%) and banking, finance, and insurance (56%). Property and retail and wholesale sectors have also seen notable growth in regulatory concerns.
Additionally, late payments remain a significant issue, troubling one in five businesses, the highest proportion since Q1 2021. Construction, business services, and manufacturing and engineering sectors are most affected by late payments.
The outlook for capital investment remains subdued, with companies expecting to grow their investments at around the historical average. Growth is expected to be strongest in transport and storage, and weakest in IT and communications!
The findings from ICAEW's BCM Q2 report underscore the resilience of UK businesses and highlight the need for supportive policies to sustain economic growth. The new Labour government has a critical role in ensuring a stable and conducive environment for businesses to thrive.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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