Local firms paint gloomy picture for H1

BUSINESS confidence for the next six months has declined in the West Midlands with companies in the region predicting falling UK and global demand will be the biggest threats to their fortunes in 2016.

The latest Business in Britain report from Lloyds Bank shows an average of respondents’ expected sales, orders and profits over the next six months has declined to 39%, down from 42% from the last report in July last year.

However the index remains close to its recent highs and above its long term national average of 24%.

The Business in Britain report, now in its 24th year, gathers the views of 1,500 UK companies, predominantly SMEs, and tracks the overall balance of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Just under a third of firms (31%) in the West Midlands identified weaker UK demand as the main threat to their business over the next six months – a rise from 29% since July. This was followed by a rise in the number of businesses that cited weaker overseas demand as the biggest threat – up to 15% from 11%.

The net balance of firms expecting an increase in total exports remained the same at 42%, despite large falls in firms’ intentions to export to Europe and Africa.
 
Exporters stated they were more concerned about the negative impact of the strength of the pound against the US dollar than the Euro. More than a quarter (26%) in West Midlands said that the value of the pound against the dollar was having a negative impact on their exports, while less than a quarter (24%) said the same for the value of the pound against the Euro.

Mark Cadwallader, area director of SME Banking at Lloyds Bank Commercial Banking in West Midlands, said: “Business confidence has slipped back slightly as companies in the West Midlands see slowing demand as a big threat to their business in 2016, both at home and abroad.
 
“Global economic conditions are causing concern in the short term, with Sterling’s strength against the US dollar and Euro causing issues for exporters. However confidence levels remain close to their recent highs, especially on the back of three years of economic growth.
 
“Businesses in the West Midlands should continue to be prepared for interest rate rises and currency fluctuations, with the recent decision by the US Federal Reserve a reminder that this benign environment is not here to stay. Lloyds Bank is playing its part in helping Britain prosper by supporting businesses to start up, scale up, trade overseas and manage their risks. Businesses have good reasons to remain confident as the long-term health of the UK continues to improve.”

Elsewhere, the latest CBI Growth Indicator paints a more optimistic view stating growth across the private sector picked up in the three months to December.

The 766 respondents to the survey, which comprises economic activity across manufacturing, retail and business & consumer services sectors, found growth improving following weaker figures reported last month.

The balance of firms reporting rising output was +20%, compared with +13% in November, well above the long run average of +5%.

Recovering growth across the retail and wholesale sectors was buttressed by a strong year end among business and professional services, though manufacturers, especially exporters, continue to face difficult times.

Overall, the economy is expected to grow at a similar pace over the next three months (+20%), well above the long-run average (+10%).