Risk & Economy » Brexit » UK businesses uncertain about the future despite increase in global business optimism

Global business optimism enjoyed a record high for the first time in 25 years, at 58% in quarter 4 of 2017. Profitability expectations have also increased in global businesses, with 50% of firms expecting higher profits in 2018.

Grant Thornton’s International Business Report (IBR) collected this data in their quarterly survey, which has been running for 25 years.

The fact that 36% of firms around the world feel confident in increasing their selling prices over the next 3 months also points to a more positive global business mood.

This contrasts with the survey’s UK findings, which saw optimism fall steadily leading up to and following the result of the referendum on EU membership.

Figures from quarter 4 of 2017 show 12% optimism, a 3 percentage-point rise from the previous quarter, but a 14 percentage-point drop since 2016 and a 61 percentage-point drop from Q4 of 2015.

“UK businesses have effectively been kept in a holding pattern since the vote to leave the European Union in June 2016, with very few details over Brexit negotiations causing significant uncertainty since,” said Robert Hannah, chief operating officer at Grant Thornton.

“However, the past few weeks have given businesses a degree of clarity over the process and we should see this start to be reflected in optimism figures over the coming months. The ‘breakthrough’ deal agreed in Brussels, along with earlier details on the Government’s Industrial Strategy and corporate governance reforms have all given businesses a lot to consider over the holiday period.”

A more encouraging aspect of the survey results is the eagerness of UK firms to increase their exports, which has been steadily growing over the last four quarters.

Twenty-four percent of UK businesses are expected to increase their exports in the next year, compared with only 15% in the same period of 2017.

Hannah added: “To help further allay UK businesses’ concerns, the Government’s focus should now be on agreeing a Brexit transition period, which would provide certainty in the short term and remove the possibility of a ‘cliff-edge’ Brexit in March 2019. If this is not agreed by the end of Q1 2018, we could expect to see more firms implementing their ‘no deal’ contingency plans.

“It’s encouraging to see British businesses increasingly focusing on their export strategies and attempting to maximise opportunities in markets abroad. While many dynamic businesses are still finding growth opportunities in the domestic economy, those businesses that are actively establishing relationships in international markets stand to benefit the most in the mid-to-long term.”