Business confidence in North West falls says accountants’ survey

Business confidence in the UK improved marginally in Q4 2023, though this remains below the historic average, according to the most recent survey by the Institute of Chartered Accountants in England and Wales (ICAEW). 

Against a backdrop of easing inflation, with interest rates fixed at 5.25%, the findings from the ICAEW’s latest Business Confidence Survey put confidence at 4.2 on the index for Q4 2023, compared to 2.9 for the previous quarter and the pre-pandemic average of 7.2.

The ICAEW’s quarterly analysis comes ahead of the publication of the Family and Owner-managed Business Survey report from Accountancy firm Armstrong Watson which delves into the issues businesses are facing and how they are adapting to the current economic climate.

Paul Dickson, Armstrong Watson CEO and Managing Partner, said: “The ICAEW report provides insights into the economic sentiment and challenges faced by businesses in the North West, reflecting a mix of optimism and caution as they navigate the post-pandemic landscape and Brexit adjustments.”

The Business Confidence Index in the North West fell during Q4 2023 to 3.9%, which is below the region’s historical average and down from 12.1 in Q3, when it was the most optimistic region.

Healthy domestic sales – the strongest in the UK at 5.9% year-on-year – are likely to have stopped business confidence falling further. On the other hand export growth in the North West (where businesses are among the most reliant on the EU market for exporting goods) was among the weakest in the UK at just 0.4% more than Q4 2022. Despite this, export growth is expected to gain momentum in the next 12 months.

Businesses in the North West also reported facing increasing financial challenges, particularly with late payments, the highest level since Q2 2013, and a more prominent issue in the North West than any other region. The tax burden and bank charges were also a growing concern.

Employment growth in the North West has stabilised and salaries in the region are rising close to record highs with an increase of 4.3% year-on-year for Q3 2024.

Nationally, customer demand remains one of the most significant challenges, with 35% of those surveyed citing it as a growing concern, reflecting the continued cost of living squeeze and the impact of high interest rates. Regulatory requirements are the other major concern – primarily an issue in the financial sector – while financial challenges relating to the tax burden, bank charges, late payments, and access to capital are listed among the other factors businesses see as a growing challenge compared to the previous 12 months.

The accountants, business and financial advisory firm surveyed 300 family and owner-managed businesses across a range of sectors in November and December 2023. Business owners shared their views about the impact of external pressures and the issues that will impact business growth over the next three years and provided insight into how they are adapting and evolving.

Paul Dickson said: “With the Spring Budget just around the corner, we hope that there will be some good news for businesses, though the Chancellor’s options seem limited as the Government’s borrowing costs have risen over recent months and there is now thought to be less ‘fiscal headroom’ than previously expected.

“We hope to see more clear guidance on the merger of the R&D schemes announced in the Autumn Statement, but it is unlikely that there will be a reduction in Corporation Tax and, given that “full expensing” for capital expenditure was made permanent in the Autumn Statement, we also don’t anticipate any further changes to capital allowances for businesses.”