According to a survey conducted by the Institute of Chartered Accountants in England and Wales, companies’ finances are in increasingly good shape, with profits and exports growing at their fastest pace since before the Brexit vote, whilst capital investment is at a two year high! For the full story please read the article below which appeared in The Daily Telegraph today.
Roger Mundy, Managing Director, Beardsley Theobalds, 6th November 2017
UK businesses are flourishing despite Brexit uncertainty
Britain’s businesses are prospering despite fears over the state of the economy, with profits rising and investment spending back on the agenda.
Although companies remain cautious because of political uncertainty, their finances are in increasingly good shape, according to a survey from the Institute of Chartered Accountants in England and Wales (ICAEW).
Profits and exports are both growing at the fastest pace since 2015 – well before the Brexit vote – and capital investment spending is also at a two-year high. Employment intentions are robust and research and development spending is also on the up.
Michael Izza, chief executive of ICAEW, said: “While businesses are struggling to be confident in the current environment, there are reasons to be more optimistic.
“Businesses are controlling costs and there is finally some improvement, though small, in export sales growth. IT, construction and business services are all modestly positive. Even retail has seen an improvement in confidence – albeit still in negative territory.”
However, confidence is fragile. “These findings highlight the cliff edge that the UK economy is on at the moment. The recent interest rate rise was not unexpected but any sudden shocks from the Chancellor at the Autumn Budget could have a serious impact,” said Mr Izza.
“Businesses to some extent know that uncertainty is to be expected due to Brexit, but they must again see good reason to invest in technology, training and development, as well as new products and services to help drive economic growth in 2018 and beyond.”
Challenges facing businesses at the moment include regulation, with the ICAEW noting the apprenticeship levy, gender pay reporting rules and incoming data protection red tape are all weighing on firms.
A shortage of skilled workers is also evident. Around a quarter of firms said they need more skilled staff, though only 16pc said a shortage of managers is a problem.
Separate data from EY suggested growing confidence among UK-based businesses, as many prepare to hit the acquisition trail. 60pc of UK companies plan to make acquisitions over the next 12 months, the consultancy’s Global Capital Confidence Barometer found.
This is the highest level since 2009, and four percentage points above the global average. EY found that most UK businesses are focusing on deals up to $250m in size, with 57pc of respondents seeking acquisitions of this scale, and 20pc were looking at deals worth up to $500m.
The barometer also revealed that, while Brexit is a driver of deals as companies reorganise their portfolios, it was also cited as a risk to them.
Despite the uncertainty Brexit is causing, the UK still remains one of the most popular targets for acquisitions, behind the US and then China, and ahead of Germany and Australia in fourth and fifth spots respectively.
Steve Ivermee, managing partner at EY, said: “UK companies are facing an unprecedented breadth of challenge and change. Given these risks, the confidence shown by UK companies implies a strong belief in their ability to respond.”