news

UK business optimism stagnates as confidence surges across the Eurozone

Optimism amongst UK business leaders fell slightly in the first quarter of the year, according to new research from the Grant Thornton International Business Report (IBR). The report reveals a stagnating of confidence amongst UK business leaders, down to 65 percent in Q1 2015, from 68 per cent in the previous quarter and a record 83 percent registered in the same period last year.

The UK findings come in contrast to business optimism across the Eurozone economies in the first quarter of 2015, where confidence is moving back up towards pre-crisis levels. Optimism amongst Eurozone business leaders jumped to 38 percent, from 13 percent in the previous quarter. Moreover, the Eurozone economies hardest hit by the financial crisis, such as Ireland and Spain, showed some of the strongest improvements, with Ireland ranking highest globally at 92 percent.

Despite the slight drop in overall business optimism in the UK, many business leaders are maintaining strong revenue (+69%) and employment (+50%) growth expectations, and are expecting to invest in plant and machinery (+50%) and R&D (+24%) over the next 12 months.

Scott Barnes, CEO of Grant Thornton UK LLP, commented: "Businesses trade on certainty, so the uncertainty created by the highly unpredictable General Election, coupled with continued dialogue on Britain's future in the EU is starting to unnerve some business leaders. In order for their growth expectations to translate into more tangible realities, businesses need to invest in the skills and resources for growth – a difficult thing to do when so many 'known unknowns' still linger."

The research also finds that a lack of skilled workers (31%), economic uncertainty (28%) and regulation and red tape (23%) are amongst UK business leaders' top concerns and constraining their growth prospects.

Barnes continued: "The UK economy has been on a steady upward trajectory as of late, and businesses up and down the country have found innovative ways of competing during the downturn – particularly the dynamic mid-sized businesses. However, the infrastructure for growth which can afford UK business longer-term success needs to be addressed – particularly as it relates to developing a talented workforce capable of meeting business demands. Whichever party(ies) takes up residence in Number 10 in the coming months must address these concerns if the UK is to firmly cement itself as a global business hub."

Global outlook

Globally, the increase in optimism in Europe is mitigated by sharp downturns in Latin America and Eastern Europe. Driven by Brazil (-18%), Latin America has fallen to an all-time low of 5%. Business confidence in Eastern Europe has dropped to just 6% with Russian businesses increasingly pessimistic (-6%).

Scott Barnes concluded: “The once-mighty BRIC nations seem to no longer be moving in lockstep, as the Chinese and Indian economies gather steam, the Russian and Brazilian markets seem to be abating.  This offers the obvious concerns for UK businesses exporting to these markets; but also a significant opportunity for UK businesses to look beyond the traditional emerging economies to other high-growth developing nations where 'Brand Britain' carries a premium."