UK Business Confidence 2015

A new report has found that business confidence in the UK is falling, however, growth will continue as a result of SMB’s strengthening contribution to the economy.

The ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) is one of the most comprehensive reviews of UK business confidence. The latest report predicts that a loss in confidence is currently causing some businesses to invest less, which could result in weak growth for the UKs economy in 2015.

It’s important to note that in 2014 the UKs economy grew at its fastest rate since before the financial crisis in 2009. Business profits and turnovers reached their fastest growth rates, which is still expected to rise steadily over the next year. This steady growth is predicted to rely on SMB contributions fuelled by domestic demand.

SMBs who depend on domestic markets currently have the highest Confidence Index reading, even though businesses stating that they’re less confident for the year ahead has risen by 10% in the last year. This loss of confidence generally seems to be a shared perception amongst larger businesses who deal with global markets, who are most concerned about weak growth in the euro zone.

Uncertainties in the domestic and global markets, due to political and economic factors are affecting business perceptions. One of the main contributing factors it the outcome of the general election on 7th May, which could result in a referendum on the UK’s EU membership. The severance of this relationship with the EU could potentially result in a loss of European trade and limit larger businesses prospects for expansion.

Europe currently accounts for 50% of the total value of UK exports, worth an estimated £211bn to the economy, which supports 4.2m UK jobs. Therefore, the possibility of exiting the EU is making it harder for companies to plan effectively. Added to this, there are talks of Greece leaving the EU, along with continuing tensions in Russia and Ukraine, which are affecting the economy and business confidence.

However, 2015 is likely to be a year where small and medium-sized businesses provide a strong contribution to UK economic growth. SMBs that are largely domestically-focussed and have the highest Confidence Index reading, are likely to experience growth due to an increasing demand within the domestic market, which is encouraging news. As Charles Davis, Director of Cebr said, “The latest BCM results point to a year of relatively stable growth conditions for 2015, with sales supported by domestic spending and rising consumer incomes in real terms, rather than by foreign demand.”

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