UK business confidence falls to its lowest level since 2009, survey warns


UK business confidence fell to its lowest level in at least 13 years in October, new findings warn.

Most British businesses are bracing themselves for a huge jump in costs over the next year, with 80 per cent expecting to have to fork out more for staff wages, according to the latest Accenture/S&P Global UK Business Outlook Survey.

Business profit forecasts are also, according to the survey, ‘downbeat’ in most regions of the UK, with many firms also planning to cut capital expenditure and reduce research and development spending in the coming months. 

Tough times: UK businesses slumped to its lowest since 2009 last month, a survey claims

While confidence among UK businesses slumped to its lowest since 2009 last month, sentiment remain stronger than elsewhere in Europe, the findings show. 

‘Businesses often noted that threats to growth outweighed any opportunities, with rising energy costs and entrenched inflation the key drivers of a downbeat outlook’, the survey results said. 

‘Mentions of recessions in the domestic and global economy over the coming 12 months were frequent, with panellists often linking higher prices to cutbacks in consumer spending.’ 

Selling prices are also likely to rise sharply, according to the findings, but these are unlikely to climb quickly enough to offset a negative outlook on profits. 

Firms in the southwest of England and Northern Ireland are expecting the sharpest drop in profits over the next year, while firms in Scotland and the southeast of England remain more confident about their bottom lines. 

The quarterly survey of business optimism polls 12,000 businesses globally, including 1,400 within the UK. 

Employment levels among UK businesses are still expected to rise,  but hiring intentions across businesses have fallen to a two-year low, according to the data. 

When it comes to being able to hire staff with the rights skills-sets, sentiment among businesses for the next year has remained broadly unchanged from 2021, with the proportion of firms lacking confidence in this regard slipping slightly from 40 to 35 per cent. 

But, the UK findings added: ‘Only half of firms surveyed were confident about recruiting entry-level staff, while only 29 per cent expect to find experienced candidates. 

‘Businesses are most likely to prioritise hiring employees with Operations (28 per cent), Sales & Marketing (18 per cent) and Digital skills (15 per cent).’

Employment expectations turned negative in Germany, Italy and Spain, according to the data.  

Costs: Swathes of UK businesses are expecting a rise in costs over the next year

Costs: Swathes of UK businesses are expecting a rise in costs over the next year

While much of the picture may appear somewhat gloomy, businesses in the UK remain ‘net positive’ when it comes to improving output, the survey claimed. 

Forty-one per cent of UK firms surveyed said  they expect output to rise in the coming months, while 23 per cent, or less than a quarter, said they were forecasting a drop in business output. 

In fact, 12 of the 14 UK sectors surveyed predicted growth. Transport and electrical manufacturing firms registered the highest levels of positivity in this regard.

The findings added: ‘Hospitality was the only industry to signal a pessimistic outlook, with fears of reduced customer spending and high energy costs’, Accenture and S&P Global said. 

UK companies were much more confident of a rise in activity than other countries in Europe, and firms in Germany and Spain gave negative projections for the next year. The UK firms’ outlook was also higher than the global average of 17 per cent, Accenture and S&P Global said. 

Simon Eaves, market unit lead for Accenture in the UK and Ireland, said: ‘As we head towards what is likely to be a tough winter for the UK economy, business confidence has understandably been shaken. 

‘However, many British companies continue to demonstrate resilience in the face of economic difficulties.

‘Hiring plans remain positive and overall optimism, whilst muted, is higher than many of our European counterparts.

‘During these challenging times, businesses should stay focused on the long-term and plan for the next growth cycle to remain competitive.’ 

It’s a big week for businesses…and households 

On 17 November, Chancellor Jeremy Hunt will deliver his Autumn Statement and unveil his plan to tackle the UK’s budget deficit. 

It had been due to take place on 31 October, but was postponed by Jeremy Hunt after he took over from his predecessor, Kwasi Kwarteng. 

What Mr Hunt says on Thursday is likely to have major ramifications for businesses and households up and down the UK. 

The Bank of England has warned that the UK is facing its longest recession since records began.

Big day: On 17 November Chancellor Jeremy Hunt will deliver his Autumn Statement

Big day: On 17 November Chancellor Jeremy Hunt will deliver his Autumn Statement

On Friday, it emerged that the UK appears to be heading into recession after official figures published by the Office for National Statistics showed the economy shrank between July and September.

The economy shrank by 0.2 per cent during the three months as soaring prices hit businesses and households.

‘Decisions of eye-watering difficulty’ lie ahead, Mr Hunt has warned. 

Some experts think the public finances have a so-called ‘black hole’ of up to £40billion. This could, potentially, on Thursday be filled through a combination of tax rises and spending cuts.

The increase in the corporation tax rate from 19 to 25 per cent has already been confirmed. It is expected to raise somewhere around £18billion worth of additional tax annually. 

Mr Hunt’s precise plans remain unknown, but there has been also been some speculation that the Government could increase taxes on the profits of energy businesses. 

Suffice to say, it’s going to be a hugely significant week for households and businesses all over the UK. 

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