Confidence and output to deteriorate, says report

BUSINESS confidence is expected to further deteriorate during 2009  as output continues to fall, according to the latest National Business Survey.

The survey, commissioned on behalf of the UK’s regional development agencies (RDA) and Invest Northern Ireland, shows that confidence has fallen sharply across all regions and sectors with the construction and retail sectors feeling the effects of the current economic climate more than most.

Nearly 40% of the 5,000 businesses interviewed said they expected their output to fall in the next 12 months while 18% predicted an increase.

The report also found that 64% of businesses are operating below capacity – a 5% increase since the the survey was first conducted in June 2008.

Profit margins are also continuing to feel the squeeze with more than half of businesses reporting a fall in profit margins over the last 12 months.

Businesses are reporting lower cash-flow, highlighting the importance of credit support for businesses during the economic downturn such as the Government’s Real Help for Businesses package announced this month.

A regional breakdown for Yorkshire is expected later today.

However, while business confidence has declined firm are focusing on initiatives which have a direct, measurable impact on output and profits to help them weather the current economic downturn.

More than a third (35%) of businesses intend to invest more on marketing and sales over the next 12 months compared to the last 12 months, which could help them strengthen their market position in a recession.

The survey indicates that those businesses planning ahead are much better placed to cope with the current economic climate.

Businesses with formal business plans (33%) are more likely to anticipate higher domestic orders and export orders in 2009 compared to those businesses without formal business plans (63%).

And although one in five businesses (22%) reported that numbers employed were lower over the last 12 months with 26% of businesses anticipating lower employment over 2009, around 16% said had staff vacancies, which they were finding hard to fill.

These vacancies make up just some of the reported 530,000 vacancies in the UK economy between October and December 2008 (ONS 2008).

Terry Hodgkinson, chair of RDA Yorkshire Forward, said: “In this difficult economic climate it is more important than ever that we are constantly in touch with business on the ground in order to tailor business support effectively and efficiently.

“The National Business Survey helps us do just that – across all regions and across all sectors.”

He said that the RDAs were working hard with support agencies such as Business Link and local authorities to ensure that businesses gained practical support.

“We are also working to ensure that when redundancies do occur; those affected are well supported in being connected to jobs and any appropriate training,” said Mr Hodgkinson.