Key indicators

2022 GDP forecast

2022 GDP forecast

Source: HM Treasury

2022 CPI Inflation forecast

2022 CPI Inflation forecast

Source: Office of Budget Responsibility

Current Bank Rate

Current Bank Rate

Source: Bank of England

Gloom over economic outlook thickens

In March, the Chancellor warned that businesses should “prepare for the economic environment to worsen, potentially significantly" – he has so far been proved right. The consequences of Russia’s invasion of Ukraine and the subsequent sanctions regime, combined with ongoing Covid-19 effects and rising input costs continue to create significant disruption.

Economic growth forecasts continue to be revised down, with growth in 2022 now set to be below 4% and around 1.5% in 2023. Inflation continues to rise, with the Bank of England now predicting a peak of over 11% in October 2022. Inflation is being driven by both international and domestic events. Internationally, businesses are dealing with rising agricultural commodity prices and ongoing supply chain disruption, while domestic challenges include tightening labour markets and firm pricing strategies.

In response to price rises the Bank of England has raised rates to 1.25% with the market expecting rates to rise further before the end of the year.

During the Spring Statement the Chancellor signaled the government’s intention to provide further support for business later in the year – with a focus on tax cuts across the areas of people, capital and ideas.

As the outlook continues to darken the Chancellor’s response grows in importance

How are businesses feeling across the UK?

Our Business Outlook Tracker regularly surveys business leaders across the country to understand their expectations and priorities for the future. Here is what our June survey told us.

Key takeaways

Economic outlook

Economic outlook

Net optimism rose 31% between April and June, however it’s still below the 12-month rolling average

Business optimism

Business optimism

The number of companies feeling optimistic about their revenue growth surged 35% – following a negative trend that started in October 2021.

Business funding

Business funding

75% of business leaders are optimistic about their companies funding position – up 25% from April.

Profit expectations

Profit expectations

Number of companies expecting to increase profits grew 17% since April.

Are business leaders recalibrating their outlook?

The key takeaways from the latest survey suggest an optimism at odds with the wider economic environment. While optimism has increased, it’s worth noting that it’s returned to levels previously seen in October 2021 and consequently reverses a negative trend which began late last year. Might we be seeing business leaders recalibrate post-Covid?

We know there remains considerable challenges and uncertainty for businesses over the coming months, however, the fact that these are known challenges such as inflation and supply chain issues, appears to be causing less concern than the unknown challenges of the Covid-19 pandemic.

We will have to wait until our next survey to better understand whether the latest results are an outlier or the start of something bigger.

Dave Munton, Partner and Head of Markets and Clients

  • Dave Munton, Partner and Head of Markets and Clients

    “Businesses are continuing to face a perfect storm of issues with rising costs from all sides putting pressure on many to increase prices as they focus on maintaining profitability and cashflow levels.

    It’s important for businesses to act quickly and decisively. So, while it is inevitable that increased prices will be passed on to the consumer, business leaders also need to look at every aspect of their business, particularly their operational efficiency and supply chain resilience, to identify any areas of potential saving.”

What's the outlook in your region?

Use the map below to see what we found in your area

How does the UK compare to other countries?

Twice a year our International Business Report surveys 10,000 business leaders across the globe to better understand their views and expectations, and where the UK sits on the global scale.

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