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Survey reveals third consecutive fall in UK business confidence and warns of global period of uncertainty

Business confidence fell marginally in the UK in the Q3 2014, marking the third consecutive quarter of slow confidence losses after the strong recovery in 2013, according to the Global Economic Conditions Survey (GECS). The Q3 findings reveal that 31% of UK respondents reported growing confidence in the prospects of their organisations, down from 37% in the previous quarter.

This appears to have been driven by a second consecutive drop in business opportunities in Q3; although this includes a strong seasonal effect, opportunities have also fallen year-on-year. Opportunities for non-organic growth also fell, while prices and exchange rates stabilised further.. As a result of these developments, capacity building by businesses has slowed, despite other indicators pointing to an improvement in terms of access to finance. Both cash flow conditions and access to growth capital improved in Q3.

Despite this, the UK respondents’ macro-economic outlook continued to improve. The findings show that 71% of UK respondents remained optimistic, with this figure unchanged since Q2. Only 24% of respondents reported a loss of confidence, down from 27% in the previous quarter.

At the global level, the headline GECS figures, based on the views of 1,000 finance professionals around the world, show that a third of global respondents (33%, up from 32%) experienced a loss of confidence in the last quarter, while only 28% reported confidence gains, down from 30% in the previous quarter.

Despite these readings, the macro-economic outlook of finance professionals globally improved marginally in Q3 2014, with 58% of respondents (unchanged from the previous quarter) optimistic about the state of the recovery in their countries, and 37% pessimistic, a fall of one percentage point from the last survey. Similarly, approval of government policies continued to rise at the global level, with 23% of respondents reporting approval (up from 21%) and 41% disapproving (unchanged from Q2).

Commenting on the findings, Emmanouil Schizas, senior economic analyst at ACCA, said “While these results are not worrying in themselves, the latest report uncovers a number of worrying trends, namely a second consecutive quarter of falling global business confidence; a growing reliance on government spending; fears of deflation in the developed markets; and a synchronised fall in capital spending around most of the world.

“It is clear that the buoyancy of the financial sector has masked the true picture in the real economy, where despite growth capital being at its most accessible since the global economic crisis, the lack of genuine business opportunities has meant that investment has been subdued around the world.” continues Schizas.

The report also notes that the rapid escalation of issues previously thought to be contained, such as the Ukrainian crisis, the Ebola outbreak and the rise of the Islamic State, raised serious questions about how the global economy would react to a truly destabilising global event.

This was posted in Bdaily's Members' News section by ACCA .