Transport & storage sector the most confident as business in general struggles with new economic landscape
16 August 2012
Business confidence overall has deteriorated despite export growth holding up, according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM). Transport & storage businesses remain upbeat, expressing the greatest confidence for the next six months.
Key findings for Q3 2012 show:-
· The BCM Confidence Index stands at +1.1, down from +12.0 in Q2 2012. This is the fourth largest quarterly decline since BCM began
· The Transport & Storage sector stands at +8.9
· Businesses have revised down their expectations of future turnover and profit growth as domestic demand remains weak
· Despite companies having cash, firms expect capital investments to increase by just 1% over the next 12 months - a worrying sign for economic prospects
· Expected export growth over the next 12 months is still broadly at pre-financial crisis levels though, meaning an export-led recovery remains a possibility
Philip Bird, Director, Grant Thornton UK LLP said: "The transport & storage industry has shown some good resilience during the turbulent last few years. Confidence does prevail, however challenges remain. Innovation within the sector is key to its success. The next 12 months will likely be a period of consolidation with the creation of more companies of scale and the ability to invest in innovation and diversification of their business models."
GDP to flatline in Q3 2012
The fall in confidence by nearly 11 points implies GDP growth of +0.1% in Q3 2012. This follows the recent ONS first estimate of -0.7% for Q2 2012. Business Performance Indicators such as expected turnover and profit growth have also both fallen back as companies become more realistic about the economic conditions.
Inflation to fall back further
Reported growth in selling prices has fallen to its lowest level since Q1 2011 this quarter. This suggests that inflation is unlikely to be a problem for the UK economy over the next few years. Weak demand for goods and services will curb prices and the Bank of England has already signalled it is worried about inflation falling below its target of 2%.
Future exports and recruitment remain positive
The slowdown in global trade has hit exports and expected growth has weakened to its lowest level since Q4 2009. Forecast growth in exports remains positive though, with an increase of 3.6% predicted for the next 12 months. This matches the growth rate seen for exports prior to the recession.
Firms also have cautious plans to take on new staff. There has been a 0.9% increase in headcount in the past year and a 1.2% increase expected in the next twelve months.
Retail, Construction and Property sectors least confident
The retail sector saw a big fall in confidence this quarter from +10.6 in Q2 to -6.4, perhaps down to the wet weather through May and June. Construction and Property continue to reflect the volatility of the economy with falls in confidence from +5.5 last quarter to -8.1 and +4.5 to -2.5 respectively.
For further information go to icaew.com/bcm