Key findings
UK headline index rebounds to highest level in a year (+43% in February), from record low of +18% in October 2022; North West jumps from +19% to +40%
Profit forecasts turn positive for the first time in a year, with the North West reporting highest forecasts outside London.
North West business confidence notably higher than both European and global average
UK employment outlook strengthens, but capex and R&D plans continue to lag
North West business confidence rebounded in February and the national outlook jumped to its highest level in 12 months, according to the latest Accenture / S&P Global UK Business Outlook, as expectations towards future activity picked up sharply from a record low in October.
Having been at +19% in October, the new report shows that North West business confidence has doubled to +40% as business leaders begin to look ahead with more optimism, though many respondents cited energy prices as a key issue going forward.
Other positive signs of resilience for the region were the profit (+27%) and employment (+20%) forecasts which increased from -1% and +11% respectively. The net balance of firms in the region expecting profits to rise was the highest in the country outside London (+35%).
Despite the businesses expecting an increase in profits, business leaders are still concerned about their output prices. The net balance of those in the region expecting output prices to rise (+38%) increased slightly from October 2022 (+36%) and remained below the national average (+50%), though levels remain historically high.
Predictions for capital expenditure and research & development plans were less encouraging. The net balance of firms in the North West expecting an increase in capex spending stood at +3%, a decrease from +7% in October and just below the national average of +5%. At the same time, the expected growth in R&D spending remained at the same level as in October (+2%), and although higher than the national average (-3%) the lack of an increase suggests that tight budgets could threaten opportunities for growth.
Commenting on the findings, Andrew Finlayson, North West lead for Accenture, said: “Businesses in the North West continue to show huge resilience in the face of these challenging times. However, with the cost-of-living crisis, a tight labour market and the current inflationary conditions still casting uncertainty over the UK, there is a temptation for businesses to hold back on their spending plans. This has to be resisted and firms in the region need to focus on the long term.
“Empowering and upskilling employees with digital technology fuels productivity. It allows them to give more time to areas requiring a higher skillset and a competitive human touch. This will be an essential driver of growth and will lay solid foundations for competitiveness as the economy rebounds.”
The UK Outlook
UK business confidence stands at its highest level in 12 months. At +43%, the net balance of manufacturing and service sector firms expecting activity to increase over the next 12 months was the strongest recorded in a year, and marked a significant uptick from the +18% registered in October 2022.
UK companies were more confident than almost all of their European peers, with levels of optimism nearly double the average seen in the eurozone (+23%). Notably, business confidence on a global scale was also at its highest for a year (+32%), but remained lower than the UK average.
The boost to UK business expectations reflected growing confidence in nearly all of the 14 sectors covered by the survey, as firms predict a pick-up in customer demand and the easing of inflationary pressures. Hospitality firms registered positive sentiment for the first time in a year (+22%), with hopes that tighter budgets will lead households to spend on domestic “staycations” rather than holidays abroad.
With business activity and profit forecasts improving, UK businesses signalled greater optimism towards hiring in February. The net balance of firms predicting a rise in employment more than doubled to +26%, after hitting a two-year low of +11% last October. Firms suggested that labour shortages will continue to pose an issue, although the proportion of businesses confident of finding skilled staff jumped from 34% to 44% in February.
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