Growth continues but Business Confidence slips to Six Month Low

Posted on 9 September, 2014 by Kirsten Kennedy

UK businesses are facing a period of uncertainty, with the upcoming Scottish independence referendum and a proposed hike in interest rates compounding issues such as increasing commercial property prices and skills shortages in the country’s workforce. In turn, this has caused confidence to flag somewhat in recent months, with last month seeing business confidence fall to its lowest level since February.

Growth-continues-but-Business-Confidence-slips-to-Six-Month-Low

Within the manufacturing sector, confidence was particularly affected by worries over exporting opportunities within the Eurozone according to business advisors at BDO LLP. The drop in confidence has even led to speculation that the Bank of England may choose to delay an increase in interest rates until the second quarter of 2015 rather than implementing changes during the first quarter.

Fortunately, new data published by the Lloyds Bank Regional Purchasing Managers’ Index shows that this drop in confidence has had little impact upon business activity so far. The fastest rate of growth in a quarter was recorded last month, with experts attributing this to subdued cost inflation and stable demand for new businesses.

Managing director for SME and mid-markets banking at Lloyds Banking Group, Tim Hinton, believes that statistics contained within the report indicate long term stability for businesses of all sizes.

He says; “Business conditions have continued to strengthen throughout the summer, and companies across England and Wales have been taking advantage of a more supportive economic climate, underpinned by improving demand.

“Job creation continued to grow robustly in August, highlighting increasing confidence among businesses that rising workloads and greater customer spending patterns will be sustained over the longer term.”

Job creation was one of the key targets for manufacturing firms in particular, although according to manufacturers’ organisation the EEF investment priorities have changed somewhat.

Manufacturers are now choosing to spend more on staff training, research and development and recruitment, indicating that they are now looking to help workers to grow their skills whilst maximising productivity.

While businesses in the North West, Yorkshire and Humberside all enjoyed a boost to overall activity, with England’s regional index rising to 54.9 per cent in August, in Wales the situation was rather different. Its index fell to 58.5, from 60.0 in July, marking the lowest reading in three months and sparking fears that contraction may be on the cards.

In essence, the question is why confidence is taking such a hard knock when, overall, businesses appear to be experiencing some of the strongest conditions seen since before the recession? Fears over the future are certainly playing a part, with few businesses unaware of the dwindling supply of skilled workers – perhaps explaining the continued recruitment drives implemented by many.

Should productivity remain high and demand continue to build, businesses may well achieve a comfortable level of confidence without the peaks and troughs seen in recent years.




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