West Midlands business confidence falls back further in Q3

John Kelly
X The Business Desk

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Business confidence in the West Midlands has dropped further back into negative territory nduring the third quarter, accountancy body ICAEW has said.

The body said region had reached a figure of -7.5 in Q3 confidence index and was on top of the West Midlands being the only region in the UK where the confidence index was still negative in Q2 (despite three quarters of improvement).

In its latest Business Confidence Monitor, he ICAEW said the snap General Election, the hung parliament and the hesitant progress of Brexit negotiations had meant businesses were adopting a more cautious, wait-and-see approach.

The BCM’s key findings for Q3 were:

• Over the last year, despite weaker confidence, there has been a slight upward trend in sales volumes growth in the West Midlands, to 4.2% per year in Q3 2017, and a very similar expansion in turnover (4.3%). But that upward trend now seems set to end, and sales expectations for the year ahead are being revised down.
• The expected deceleration in overall sales in the West Midlands will mainly stem from the domestic market, slowing from 3.8% in the year to Q3 2017, to 2.5% over the year ahead.
• Investment intentions are also showing the hallmarks of uncertainty in the region. Capital expenditure growth slowed from 3.5% per year in Q3 2016 to 1.5% in Q3 2017, and is expected to rise by just 0.9% over the next 12 months.
• One positive for the year ahead is that businesses in the West Midlands predict that the worst could be over regarding input price inflation, which grew by 2.6% in the year to date. Businesses expect a rise of 1.6% in the year ahead, only marginally ahead of the increase in selling prices.
• As a result, profits growth is predicted to remain broadly the same (2.9%) over the next 12 months, as it was over the last 12 months (3.1%).

John Kelly, president of the Birmingham and West Midlands Society of Chartered Accountants, said: “The on-going fall back into negative territory in the West Midlands 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.”