Risk & Economy » Brexit » UK business leaders still glum about the future

BRITISH BUSINESS leaders are not optimistic about the future, according to a new business survey.

This big drop in confidence is due to the referendum vote to leave the European Union. The UK’s lack of confidence among business leaders is however in sharp contrast to those around the world where the survey reports a strong increase in optimism, Grant Thornton’s quarterly global survey of 2,600 businesses found.

The UK saw a 5% quarter-on-quarter uplift in optimism, in line with the global average. The net 26% figure is substantially below the 73% recorded this time last year.

Research from the Grant Thornton international business report showed that global business optimism at the end of Q4 2016 stood at net 38%, a rise of 5% from the previous quarter, and the highest level since the same period the previous year.

In the US, optimism rose to 54% from 43%, with the increase mirrored around the globe. China (46% from 30%) and the EU (34% from 28%) reported similar jumps.

EU countries with strong trading ties to the UK, such as in Ireland (-22pp), Poland (-14pp) and Italy (-14pp), also reported significant drops in confidence.

Encouragingly, UK employment expectations for the year ahead rose +18pp in the quarter, alongside gains in profitability expectations (+4pp) and revenue increases (+1pp). More UK businesses also said they would invest more in R&D (+14pp) and plants and machinery (+8pp) than in the previous quarter.

But exchange rate fluctuations remain a key concern for UK businesses, up +12pp from the previous quarter and +20pp from the same period last year.

Robert Hannah, chief operating officer at Grant Thornton UK, said: “Many UK businesses are now treating uncertainty as the only certainty, and adapting to the new norm in more prudent ways than was possibly the case earlier in the year, when Brexit and a Donald Trump presidency seemed a distant possibility.”

“But for the most part, business leaders are shrugging it off, having a bit more clarity than they had three months ago during our last global survey. They know that Brexit is happening, they know the identity of the next US president, and with those questions answered they start the New Year in a positive state of mind. That is evident in investment and revenue expectations too.”

Hannah said however that challenges remain. Many businesses will be looking at what a weaker Sterling means in the longer term, particularly as import costs for raw inputs and other goods start to be felt more strongly.

Retailers will inevitably start to increase prices in order to keep pace, meaning that consumer spending could significantly slow down, forcing businesses to look for growth abroad.