A member of the UK200Group comments on news that business confidence has dropped
A member of the UK200Group of independent accountancy and law firms has commented on news that although UK economic growth is expected to continue throughout 2015, a drop in business confidence suggests that the current momentum is under threat. The Output Index from BDO increased to 104.5 from 104.4 this month, indicating that UK businesses expect continued robust growth in the latter part of 2015. However, the Optimism Index suffered a drop to 101.9 this month, down from 103.3, representing a fifth consecutive monthly drop in UK business confidence and demonstrating that companies are concerned about their prospects beyond 2015. Manufacturers are particularly worried and recorded their lowest level of confidence since November 2012.
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“Generally, small businesses and many larger businesses, especially those dependent upon the UK market, are cautious about their prospects for the coming year. The underlying problem for them is the capitalist economic model which is ultimately based upon consumer spending and the impact on businesses of the Government’s changes to pensions and the National Living Wage (NLW). Yes, productivity and good business management are all factors in business success, but margins and efficiencies in business have been squeezed to the limit and now the problem is the lack of customers. The Government is openly trying to reduce its spending and the public debt, the average consumer is also trying to reduce their debt and has not seen real increases in spendable income for a decade, and because business cannot see a customer they are not investing either. The hope for UK and the businesses was that growth overseas would increase our exports and therefore bring money back to the UK for it to be spent here, but these markets are now slowing. Coupled with the prospect of increasing interest rates, which may not be a problem for businesses which have substantially less borrowings, it will further dampen spending, the increase in costs and further tax on income of the auto enrolment for pensions. The final nail in the coffin was the NLW announcement, moving cost from Government to business.”
