Our Corporate Finance Partner, Steve Plaskitt, attended the latest ICAEW UK Business Confidence Monitor (BCM) and shares his thoughts...
I attended the June announcement by Keith Proudfoot of the ICAEW Business Confidence Monitor for Q2 2017. This is the rolling survey of finance directors and is a great barometer of the health of UK business as it is meant to closely anticipate future GDP.
The main message was a return to positive though weak confidence – measured as an increase from -8.7 to 6.7 for the UK after three negative quarters. In order to quantify business confidence the survey asks FDs questions about their confidence for the next 12 months compared to the prior 12 months. ‘Confident’ is given a score of 50 and ‘very confident’ a score of 100. Negative scores represent less confident positions and all the answers are collated and averaged.
This reflects a gradual upward trend rather than a sudden upswing. FDs in the North East saw increased confidence (a rise from -2.4 to 5.6) and the construction sector saw a similar return to confidence for the first time in a year (-5.5 to 3.3). The property sector saw a huge upswing in confidence from (-22.5 to 2.6).
When asked about spare capacity, 35% of North East construction FDs believed they had spare capacity compared to a whopping 70% of manufacturers.
The main issues for business owners included input price rises (up 2% compared to 2012), competition (37% of respondents), customer demand (33%) and lack of direct skills (20%).
Also in attendance was the Bank of England’s Mauricio Armellini who gave a brief talk on The Economic outlook. He explained that Brexit negotiations are the biggest influence on the MPV forecasts (as yet we don’t know the process and the destination), and assuming a smooth Brexit transition, (i.e. avoiding a “cliff edge”) then inflation is forecast to be 2.9% and economic growth 1.9% at the end of the year.
He also showed that the markets expect 0.5% interest rate in mid 2019, based on international forward rates.
Finally, some good local news for the North East – employment was up 26,011 in the last quarter to April 2017.
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