Business confidence has dipped, report says

BUSINESS confidence has deteriorated despite export growth holding up, according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor. 

Key findings from the survey, which covers activity so far in the third quarter of the year, found that the index stands at +1.1, down from +12 in the second quarter and the fourth largest quarterly decline since BCM began.

Businesses have revised down their expectations of future turnover and profit growth as domestic demand remains weak, the survey found.

And despite companies having cash, firms expect capital investments to increase by just 1% over the next 12 months.

However, expected export growth over the next 12 months was found to be broadly at pre-financial crisis levels, meaning an export-led recovery remains a possibility.

Michael Izza, chief executive of ICAEW, said: “We have not yet been able to capitalise on the cautious optimism we saw from businesses earlier in the year. As we search for signs that growth is accelerating, businesses are holding back on investing, still nervous about the future.

“What is clear is that we have to break the circle and take advantage of the opportunities that are around today. Investment in housing and new infrastructure might just bring the growth and confidence that we need.”

Scott Barnes, chief executive at Grant Thornton, said: “The findings for this quarter are not a surprise. Global growth has slowed, markets have responded downwards and the eurozone crisis will not go away. 

“The one positive note is the encouraging levels of exports. Inward investment and overseas expansion will be core to improving the UK economy and as such we applaud any Government initiative that seeks to promote UK business on the international stage.”