...though global uncertainty weighs on resurgent business confidence
New research from the Grant Thornton International Business Report (IBR) has found that the UK ended 2014 as one of the world's most optimistic economies. Although UK business optimism declined on a quarterly basis (from 82% in Q3 2014 to 68% in Q4 2014), the UK still ranked amongst the top five international economies in Q4, just ahead of the United States. Taken on a full-year rolling average, the UK remains within the top five most optimistic economies over the year, at 79% - the country's highest annual average in more than 10 years and well above the global average of 41%.
Supporting this optimism amongst UK business leaders, the data shows positive year-on-year expectations amongst businesses for: employment (+12%), revenue and profit (both +9%) and exports (+2%). Moreover, only 8% of UK businesses pointed to access to short-term finance as a potential constraint; the lowest amongst global economies surveyed.
Scott Barnes, CEO of Grant Thornton UK LLP, commented: "In many ways, 2014 was the first year since the 2008/09 financial crisis where businesses felt they were really back on track. The measures adopted to cope with the downturn helped many of them turn into leaner and more nimble operations, the fruits of which are now ripening. Consequently, UK businesses are entering the new year on a stronger footing."
However, economic uncertainty does remain a concern for 19% of UK businesses (3pp increase from the previous quarter); along with fluctuating exchange rates for 19% of domestic businesses (10pp increase from previous quarter). Moreover, a lack of skilled workers continues to weigh on UK business leaders' minds, with over a quarter (27%) pointing to this as a major constraint for the year ahead.
Barnes continued: "Concerns over a lack of skilled workers and exposure to instable currencies are playing heavily on business leaders' minds and could adversely impact the positive momentum the economy has generated recently. Heading into the general election, jitters could become more profound amongst business leaders."
Globally, the IBR reveals that while business confidence in 2014 climbed to levels not seen since before the financial crisis, a recent spate of uncertainty is weighing on growth prospects for the year ahead. With the price of oil plummeting, the future of the eurozone still far from secure, tensions in Ukraine and concern around the pace of the slowdown in China, the confidence of business leaders, especially in the world's largest three economies, has slipped as we enter 2015.
The IBR shows that global business optimism for 2014 stood at an average of 41% compared to 28% in 2013 and just 12% in 2012. But in Q4, global optimism dropped from 43% to 35%, driven by steep falls in the United states (down 10 percentage points to 59%), China (down 30pp to 25%) and Japan (down 12pp to -12%).
Barnes concluded: "Business confidence is a key indicator of future economic performance. The large rise in global optimism in 2014 came as a pleasant surprise after a couple of tough years but the dip in the last three months suggests that businesses around the globe see trouble on the horizon in 2015."