Business confidence is dipping

Here’s why

Business confidence has fallen back into negative territory, reversing the gains made in Q2 2017, according to the latest ICAEW Business Confidence Monitor (BCM). 

A snap general election, the hung parliament and the hesitant progress of negotiations with the EU has meant British businesses are now adopting a more cautious, wait-and-see approach.

Key findings for Q3 2017: 

  • The Business Confidence Index is now back in negative territory, falling from 6.7 in Q2 to -8 in Q3, similar levels to the first quarter of 2017
  • GDP growth for the third quarter is forecast at 0.2 per cent, after 0.3 per cent in the second quarter
  • Input prices continue to rise at 2.5 per cent year-on year
  • Household incomes will continue to be squeezed as businesses seek to control overall cost rises by holding wage growth to a rate below inflation
  • The depreciation in the value of Sterling hasn’t led to faster growth in exports
  • Businesses are not investing at the level needed to generate faster UK economic growth. Expectations are for investment growth to remain well below the rates of 2014 & 2015
  • A shortage of non-management skills is a growing concern by a record-equalling number of businesses whilst investment in staff training remains weak 

Mathew Rideout, ICAEW Director of Business said:  “The fall back into negative territory is not unexpected. Since the announcement of the general election, a vacuum has been left with Government’s attention swallowed by a hung parliament and the start of EU negotiations. The industrial strategy has been lost in the void, coupled with  no clear signal towards post-Brexit policy. As a result, businesses cannot see through this haze of uncertainty and are struggling to look further than the end of the next quarter in terms of their decision making.”

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