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UK business confidence reaches post-referendum high

Global business optimism hits new record, as UK confidence reaches post-referendum high

  • Global optimism reaches net 61% in Q1, the highest in 25 years of research
  • UK business optimism at net 31%, a 19pp quarterly jump and the highest level since vote to leave the EU
  • Strong increases in optimism in EU (+12pp) and North America (+7pp) in Q1

LONDON – Worldwide business optimism is at an all-time high, according to global research from Grant Thornton’s International Business Report (IBR). The IBR finds that in Q1 2018, global business optimism stands at net 61% - the highest figure recorded in 25 years of quarterly research. The findings reveal that the sharpest increases in optimism for the coming 12 months are in Europe and North America, although in all regions levels remain historically healthy. Encouragingly, the UK saw a 19 percentage point (pp) quarterly jump in optimism, reaching its highest level since the country’s referendum on EU membership nearly two years ago.

Some of the most striking increases come in the developed economies of North America (up 7pp in Q1) and the EU (up 12pp). Confidence among US firms is at an all-time high of net 89%. In Europe, confidence is broad-based, with French business optimism at new heights (net 75%) and in Greece, business optimism sits in positive territory (net 6%) for the first time in three years.

In the UK, the number of businesses expecting an increase in revenues reached net 58% - the highest quarterly level since the referendum. Similarly, the number of businesses expecting to take on more employees over the coming year increased to net 38%, a 9pp quarterly rise. More UK businesses are also signalling intentions to increase investment over the next 12 months in new buildings (up 10pp), plants and machinery (up 10pp) and technology (up 9pp). However, the number of businesses expecting to export more in the next 12 months dropped by 7pp to 17% versus the previous quarter.

Robert Hannah, partner at Grant Thornton UK LLP, commented: “Businesses around the world have started the year on an optimistic footing, and many of the global economic fundamentals appear to validate their enthusiasm. UK businesses are at their most optimistic since the historic vote to leave the EU nearly two years ago, with confidence boosted by signs that a deal on Brexit looks increasingly likely and the recalibration of the Pound over recent months offering another sign of confidence in the UK economy.

“However, as we saw in last week’s GDP figures, this optimism is yet to translate into material economic output. The lower than expected growth in the first quarter of the year means we’re increasingly unlikely to see an interest rate rise imminently, which should provide a further impetus for businesses to ‘pull the trigger’ on investments for future growth. With a rate rise still on the cards this year, making these investments early on could prove prudent in enabling growth over the years to come.

“Whilst the forecast for domestic growth remains constrained, albeit positive, businesses shouldn’t neglect the opportunities available in the international marketplace. With the global economic outlook looking healthy, UK businesses need to adopt a more international perspective on their offering and develop export strategies which capitalise on growth opportunities abroad. The reputation for quality that British goods and services are known for around the world affords them a certain premium and competitive edge which few other counties can match.”

The IBR results follow earlier research from Grant Thornton UK LLP, which suggests that UK businesses could leave up to £72.5 billion in untapped growth potential on the table in 2018. The analysis finds that many of the barriers to growth identified by businesses remain within their remit to overcome, as opposed to external factors such as regulation or Brexit.