Uncertainty puts businesses on the back foot

Economic and political uncertainty are denting business confidence, according to the latest data from the ICARW Business Confidence Monitor.

The hung parliament resulting from the snap general election, coupled with Brexit uncertainty and economic pressures have seen firms adopt a cautious approach to business.

As a result, the confidence tracker has surged back into the negative, reversing the reasons to be positive that were first noted in the second quarter.

The score of -8 for the third quarter is similar to that noted in the first quarter of this year, while wider gross domestic product growth is forecast at just 0.2%, down from 0.3% last quarter.

At the same time, input prices are rising and consumer spending is being squeezed, ultimately placing more pressure on businesses.

The report also found that export growth has not increased as anticipated, despite how the value of the pound has fallen – a lack of investment by businesses is cited as a possible reason for this.

Current rates of investment are below those seen in 2014 and 2015 while smaller businesses have also voiced concerns over lacking finance for staff training.

The ICAEW’s Director of Business, Mathew Rideout, described the latest figures as “not unexpected” as “businesses cannot see through this haze of uncertainty”.

This has limited their ability to make important business decisions and to plan for the long-term, as they increasingly aware of the need to keep finance aside to cover for any unexpected outlays.

A failure to do this could leave firms facing financial difficulties, or worse insolvency, especially if they are unable to source alternative finance options to aid growth or solve cash flow issues.

Investing in existing and new talent, as well products and services will be key for businesses if they are to maintain growth and continue trading, as will seeking appropriate advice should things take a downturn.

One positive for UK businesses is that domestic sales have remained strong throughout 2016 and 2017, but the gap between creation costs and selling prices for exports has grown.


By Phil Smith


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