Boost to UK business confidence as outlook brightens

Andy jalil – andyjalil@aol.com – British companies are having confidence in business prospects as the wider economy improves while critical trade talks go on with the European Union. A string of recent surveys points towards expanding order books and some measures of optimism reaching peaks not seen since the EU referendum.
The outlook for the year among UK companies rebounded in December, according to accountants BDO.
Its optimum index, which shows companies’ order book expectations in the coming six months, increased to 102.15 points, after a dip in the previous month, well above the long-term average 100 mark.
Meanwhile, firms’ recruitment intentions remain just short of record highs in spite of slowing output, BDO said.
The uptick in business confidence comes at a timely moment for Theresa May, with the Prime Minister under pressure in complex on-going negotiations with Brussels as well as at home with Europhiles.
Peter Hemington, a partner at BDO, said: “UK businesses collectively breathed a sigh of relief when progress towards Brexit was announced at the end of 2017.
Business leaders are now more confident about the year ahead and are bolstering their recruitment efforts as a result.
Business confidence in London has risen to its highest level since the EU referendum in June 2016, according to an index published by Lloyds Bank.
British firms’ optimism has been boosted by the manufacturing sector, with exporters in particular benefiting from strong global growth as well as some positive effects from the weaker pound, even though it is currently showing more strength.
Data published by manufacturing body EEF and insurer AIG reveals the UK’s manufacturing executives are now the most optimistic about the global economic outlook since 2014, according to a survey of executives in the sector.
And BDO’s index of manufacturing showed output climbing above the long-term average for the first time in four months.
With export demand from Europe, the US, China and the Middle East, UK factories increased their output for an eighth consecutive month in December, with January figures yet to be confirmed.
It was the strongest quarter of growth in four years, according to the IHS Markit/CIPS purchasing Managers index.
However, firms’ outlooks continue to be dominated by concerns over how the outcome of the Brexit negotiations will affect their industries.
Brexit remains the top concern among the FTSE 350’s finances bosses, according to the latest survey of chief financial officers (CFOs) by accountancy giant Deloitte.
More than half of finance bosses say reining in costs is a “strong priority” over the year in the face of the uncertainty with the EU.
Of the economic growth in Britain as a whole, London’s will fall behind the average in the rest of the country, according to predictions for British business in 2018 from the Institute of Directors (IoD).The business group said last month that London’s financial district’s concentration of financial services make it particularly exposed to uncertainty over the Brexit process — a factor which would drag the capital down.
“This would buck a long-term trend that has seen London consistently outperform other UK regions,” the IoD said.
Meanwhile, a continued fall in migration and weaker consumer spending could “disproportionately” hit the capital city at the same time that the weakness of the pound following the Brexit vote, has boosted manufacturers, which tend to be present in higher concentrations in other regions.
However, Edwin Morgan, interim director of policy at the IoD, warned that while Brexit will take up a large amount of attention over the rest of the year, “it would be a mistake to think it’s the only show in town.” Among IoD’s other predictions are a spate of legal challenges to employers in the gig economy, a return to efforts by the Treasury to tax the self-employed more than employees, and a renewed assault on fake news from big social media companies.
Morgan said: “The gig economy has produced much beneficial innovation in recent years, but 2017 saw several legal clashes over employment status, and we expect this to continue over the rest of the year.” The changing nature of employment has become one of the central political challenges currently facing the government, with a backlash early last year leading to the scrapping of an increase in national insurance for the self-employed designed to tackle bogus self-employment.
(The author is our foreign correspondent based in the UK. He can be reached at andyjalil@aol.com)