Business confidence wilts under Brexit pressure

UK economic confidence improved a little at the start of the year, but remains lower than many other countries worldwide, according to research from ACCA and the Institute of Management Accountants (IMA)

The Q1 2019 Global Economic Conditions Survey (GECS) shows that the UK followed all key regions globally by reporting a bounce in confidence. However, UK economic confidence is lower than it was a year ago – by 22%. 

It also revealed the potentially adverse consequences of Brexit on business confidence - capital expenditure, investment opportunities and employment indices recorded negative scores.

Claire Bennison, head of ACCA UK said: ‘The UK economy remains mired in Brexit uncertainty because the Article 50 deadline for leaving the EU has been extended beyond 29 March.

‘This uncertainty is having a negative influence on business confidence.

‘Along with other countries UK GECS confidence bounced in Q1, but it remains at a low level well below its long-run average. Similarly, the orders balance improved but remains consistent with moderate, below-trend GDP growth in coming quarters.

‘The GECS investment indicators are weak, reflecting the effect of uncertainty on long-term investment decisions.’

However, concerns about inflation eased, with 48% of respondents expressing concern about rising costs, down from 52% in Q4 2018.

Bennison concluded that recession is unlikely, but that GDP growth this year looks like being around 1% at best, as a slowing global economy as well as continued Brexit uncertainty take their toll. Globally, just 22% of respondents said they had problems accessing finance suggesting fairly easy financial conditions.

A third (36%) are considering scaling back investment in new capital projects, compared with just 16% who are looking to increase investment in new projects.

Worries about suppliers going out of business is a concern for just 12% of respondents – unchanged from Q4 2018.

Michael Taylor, chief economist at ACCA said of the global results: ‘It should be recalled that confidence and activity indicators are all significantly lower than a year ago. But the orders index is little changed in Q1 compared with Q4 last year and suggests that the slowdown in growth will not be too severe this year.

‘Even before the increasing evidence of a growth slowdown emerged the inflation picture was generally benign. It has become even more so recently as demand has slowed.

‘GECS shows a fall in concern about rising operating costs. This is the third quarterly fall in a row and reduces cost concerns to the lowest since Q1 2018.’

GECS Q1 2019

By Pat Sweet

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