Northern Society of Chartered Accountants

Business confidence in Northern England is the least negative in the UK 5 June 2019

The Business Confidence Index in the North East and Cumbria is the least negative in the UK, according to the latest ICAEW Business Confidence Monitor ™ (BCM). The region’s Q2 score of -2.6 is down on the Q2 2018 score of +6.5, but well above the Q2 UK average of -16.6.

11 June 2019 breakfast briefing

Find out more at our Q2 ICAEW Business confidence & economic review breakfast – Newcastle on 11 June 2019.

Profits on the up

Businesses in the North East have reported some of the strongest rates of profit growth in the UK in the year to date; the growth of 4.0% is substantially up from the 2.1% achieved in the year to Q2 2018. Faster rises in profits have been supported by healthy sales growth.

Domestic sales and exports starting to stabilise

This quarter’s increased optimism is likely to have been helped by fairly robust domestic sales growth of 4.6% in the year to Q2 2019, which compares favourably with the 2.9% rate of 12 months ago. In addition, exports growth (4.0%) remains stable, rising in line with last year.

Moreover, a falling proportion of companies in the region reported that they are operating below capacity (down to 48%); the lowest percentage for two years.

Fewer concerns around business challenges

In addition, a lower proportion of companies than a year ago report marketplace competition and customer demand as pressing issues. The most widespread challenge continues to be regulatory requirements, but only 43% of businesses now express growing concern over these, down from 53% a year earlier.

The proportion of companies reporting the availability of non-management skills as a source of growing difficulty is now 18%, (this is down from 24% a year ago).

Outlook optimistic – except for exports

Businesses in the region expect increases in both domestic sales (4.4%) and profits (4.1%) over the next 12 months to be comparable to the past year. However, their projections for export activity in the coming year is, far less positive – they anticipate that exports will rise by the slower rate of 3.3% compared to last year, possibly reflecting the sluggishness of the world economy or concerns over Brexit.

Companies also plan to moderate all forms of investment spending in the coming year with both capital investment and staff development budget growth set to slow to 1.5%, and R&D budgets are forecast to rise only by 1.7%. These are all below the rates recorded in the past year.

James Callaghan, Regional Director Northern, Yorkshire and Humber, said: “Whilst it is encouraging to see that Northern England is the least negative part of the UK, it is still important to consider that this is the third consecutive quarter that confidence has been negative. Although confidence is – hopefully – edging towards the positive levels last seen in Q2 and Q3 2018, until we see a sustained period of increasing confidence, we should not make too many assumptions about the outlook.”

For more information: read more about the ICAEW Business Confidence Monitor on icaew.com

Download the latest report

You can download the Q2 2019 UK Business Confidence Monitor report.