Business confidence drops in Yorkshire and the Humber amid Brexit negotiations, claims ICAEW

Despite growth in sales, business confidence has dropped back into negative territory (-6.8) in Q3 in Yorkshire and Humber, according to the latest ICAEW Business Confidence Monitor (BCM).

ICAEW says that the decrease in business confidence may reflect a mix of economic and political uncertainties. This past general election, the hung parliament and the ongoing negotiations with the EU has meant British businesses are now becoming more cautious.

The report found that during Q3 2017, business confidence fell in Yorkshire but this not a reflection of sales

Sales volumes grew by 5.1% over the last year, up from 2.1% in Q3 2016. Profit growth also rose by 4.5%, compared to 1.5% a year ago.

Despite that, profit growth is predicted to slow in the year ahead to 2.9% per year, mainly as the result of a deceleration in domestic sales, to 3.8%. This slower rate of profit growth is likely to be contributing to low overall confidence.

Consequently, ICAEW says that investment is also expected to be weak. Capital investment is forecast to grow by 1.4% next year, which would be the smallest rate since Q1 2014.

Employment growth and R&D budgets are set to be even slower, at 0.7% per year.

Weak investment may also be due to 60% of businesses reporting that they are currently working below capacity, thus giving them scope for expansion without further investment over the next 12 months.

Keith Proudfoot, ICAEW Yorkshire and Humber regional director, said: “The fall back into negative territory in Yorkshire and Humber 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.

“If they haven’t already, businesses need to look beyond the next few months to a future where innovation and investment now will create a longer term return.

“They need to be investing in talent, new products and services as well as exploring new markets to help ensure they are positioned to take advantage of the opportunities that will be there once the UK leaves the European Union.

“Government also needs to articulate what business should expect in terms of transitional arrangements as they need to be planning now and cannot wait until early 2019 to find out.”