News

One year on, retail and wholesale businesses report considerable...

... rise in confidence, however an air of caution remains

Business confidence among retail and wholesale businesses in the UK has risen dramatically compared to the same quarter a year ago, according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM).

Key findings for Q1 2014 show:

  • The BCM Confidence Index for UK business as a whole stands at +37.2, up from +31.7 in Q4 2013, a new record high
  • Comparably, the BCM Confidence Index for retail and wholesale stands at +34.7, a continued high level of confidence from the sector, which reported +34.0 for the previous quarter and has risen by +22.3 over the past year, from +12.4 in Q1 2013
  • The UK economy is forecast to grow by 1.5% in Q1 2014
  • Businesses overall report the fastest investment growth since 2008, but growth in exports is expected to fall back – a concern due to the current trade deficit
  • Business performance for the sector is stabilising, as annual turnover and profit growth have held despite quarterly peaks and troughs
  • According to the figures, the retail and wholesale sector has seen a particularly strong acceleration in capital investment growth intentions, from 1.2% in Q1 2013 to 3.2% in Q1 2014, suggesting that the strengthening consumer outlook is leading to more investment

Overall, turnover and profit growth for UK businesses have picked up and are expected to grow faster over the next 12 months. The recovery is still not completely secure however, and weak pay growth is likely to continue the squeeze on household incomes despite expected domestic growth in the year ahead. 

Table 1: comparison of retail and wholesale sector confidence vs. UK overall and other sectors

 

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

UK

12.8

16.7

24

31.7

37.2

ALL PRODUCTION

6.6

17.8

20.5

26.1

27.9

Energy, Water & Mining

4.3

20.3

11.7

14.2

21.6

Manufacturing & Engineering

7.4

17

23.5

30.1

30.1

Construction

13.8

22.7

31.4

37.8

52.2

ALL SERVICES

14.2

16

24

32.5

37.6

Retail & Wholesale

12.4

9.3

22.4

34

34.7

Transport & Storage

14.9

7

19.5

28.5

37.1

Banking, Finance & Insurance

13

30.1

28.6

35.6

41.6

Property

16.5

19

18.2

44

43

Business Services

12.6

11.1

22.6

31.3

39.7

IT & Communications

19.7

25.5

30.8

22.9

30.5

Trefor Griffith, Partner and Head of Food and Beverage at Grant Thornton UK, commented: "Though it's encouraging that general retail and wholesale businesses performed well, we must not forget that for some of the large grocery retailers, things were much more subdued. Therefore while there are signs of recovery, this isn't being felt by all retailers. 

"The consumer climate remains challenging with mixed views from different commentators, however the results from the Confidence Index indicate optimism in the retail and wholesale sector a year on has risen significantly. There are some signs the economy is recovering despite wage growth remaining weak and discretionary spend constricted. In 2014, food price inflation is expected to moderate although volumes are still under pressure. The trend towards convenience and online shopping is continuing and it remains a major influence on the performance of the large retailers, a number of which are struggling in relative terms, which in turn is putting more pressure on their suppliers. Mid-range and tertiary brands are being squeezed by the growth of both the discount retailers and higher end own label products of the multiple retailers.

"Pressure will continue for food and beverage producers to improve efficiency, invest in new product development and seek new opportunities in export markets. While there are notable successes, the UK does lag behind other countries in export performance and this provides opportunity to both increase exports and also dislodge imports so that there are more home produced products on the shelves of the retailers."