Grant Thornton’s latest International Business Report (IBR) reveals UK business optimism has surged 74% over the past year – up from -3% in Q4 2012 to 71% in Q4 2013. Underpinned by a broad-based recovery, the UK is now the seventh most optimistic country about its prospects for business growth globally – ahead of both the US and China where optimism has slowed sharply in the last quarter.
The latest IBR data shows 69% of UK businesses are expecting increased revenues over the next 12 months – a 20% year-on-year and 14% quarterly uptick. This is mirrored by a 13% rise in profitability expectations (to 63%) and 7% drop in those anticipating reduced demand (to 24%) compared to Q4 2012.
This surge in optimism is reinforced by signs that the nascent recovery is more wide-ranging than previously thought, with an 8% year-on-year increase in export expectations and a predicted improvement in business investment. The results reveal a 12% climb in research and development (R&D), 11% increase in plant and machinery, and a 3% boost in new building investment expectations over the past year.
Scott Barnes, CEO of Grant Thornton UK LLP, commented: “The rebound in confidence and sustained performance of UK businesses over the past year is something that can truly be applauded. The broad base of the recovery, largely driven by mid-market businesses, sets a solid foundation for growth to continue in 2014, but it remains crucial we don't rest on our laurels at this critical juncture. To make the most of these gains and continue rebalancing the economy to ensure its fitness; business leaders are relying on policymakers to take the right actions which enable further growth – reducing red tape, increasing access to credit and assistance in exports. These measures would not only help embed long term, sustainable growth, but also further solidify the UK's position as one of the world's best places to do business."
UK employment looks set to improve with the IBR data showing 40% of businesses expecting to hire more people over the next 12 months (up from 33% in Q4 2012). However, nearly a quarter of companies (23%) are expecting a lack of skilled workers to be a major constraint on their business this year (up 9% year-on-year) and a potential threat to growth prospects.
Barnes continued: “While the number of people employed in the UK is continuing to grow, business leaders are reporting there are not enough skilled workers. A business is nothing without its people and organisations need to invest in their internal development programmes and ensure they are more closely aligned to the business’ needs, enabling companies to deliver on their strategy, drive innovation and ultimately achieve growth.”