Business development · 13 March 2017

Business confidence hits 22-month peak as owners prepare for growth

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A rise in import costs could undermine growth for small business owners

Business confidence in the private sector has reached its highest level since June 2015, according to new data that reveals positive expectations for growth among owners.

The business outlook survey, by analytics firm IHS Markit, used responses from company owners to calculate a confidence level of +52 per cent – a sharp rise from the +39 per cent registered in October 2016, a four-year low for the survey.

The figure represents the percentage of firms expecting an increase in business activity against those braced for a decline.

The results could suggest that post-Brexit vote blues are over for many owners, as IHS Markit highlighted a “sharp rebound” in workforce expansion plans.

Business owners also cited investment in technology and new product lines as key growth drivers for their company.

At +55 per cent, UK manufacturers registered the strongest expectations for business activity in 2017, as further research revealed boosts to both domestic and international sales for small manufacturing firms.

UK business confidence also scored favourably against competing European economies. British business owners were more positive than counterparts in Germany, France, Italy and Spain.

Commenting on the data, Tim Moore, senior economist at IHS Markit, said business confidence among owners had become “much more positive”.

“The resilient domestic economic backdrop has been a key factor driving the rebound of business confidence among UK private sector companies. While a number of firms cited heightened uncertainty about the path to Brexit, it seems clear that these concerns have receded in comparison to the projections reported last autumn,” he said in a statement.

However, Moore noted that rising prices of imported materials and the weakened exchange rate would start to increase costs for owners.

“As a result, UK firms are expecting to increase prices charged at the fastest pace since the survey began in late-2009,” he added.

Surge in vacancies

Closer insight from the Recruitment and Employment Confederation (REC) into the rise of vacancies confirmed that business owners were prepared for growth over the coming year.

Demand for staff reached an 18-month peak in February, according to the REC, with both permanent and temporary job vacancies increasing.

However, REC chief executive Kevin Green warned that tight competition meant employers were finding it “increasingly difficult” to fill permanent roles.

“The big question still remains about how employers will fill their vacancies,” Green said in a statement.

“We’re already seeing acute staff shortages in a variety of sectors, from healthcare to engineering. This is likely to get worse, especially if the government continues to refuse the rights of EU citizens living in the UK post-Brexit.”

Job market recovery reveals high salary growth in February

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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