UK business confidence lowest since 2009, latest Accenture / S&P Global survey finds


- UK headline index has fallen to its lowest of +18% since 2009, but remains stronger than European peers.

- Employment still expected to rise, though firms lack confidence in finding skilled staff

- Companies still expect a considerable rise in costs, with 80% of UK businesses forecasting higher wages

- UK firms project falls in both capex and R&D over the coming 12 months...

LONDON; Nov 14, 2022. UK business confidence fell by -10% to its lowest level in at least 13 years in October, but was stronger than European peers, according to the latest Accenture / S&P Global UK Business Outlook.

At +18%, the net balance of manufacturing and service sector firms expecting activity to increase over the next 12 months was the lowest recorded since 2009. The latest results compared with net balances of +28% in June and +56% in February.

However, despite tough economic conditions, the business outlook maintained a positive projection, with around 41% of surveyed firms expecting output to rise, against nearly one-quarter (23%) that project a decline.

Nearly all (12) of the 14 sectors covered by the survey predicted growth, led by strong expectations among manufacturers of transport and electrical goods. Hospitality was the only industry to signal a pessimistic outlook, with fears of reduced customer spending and high energy costs.

UK companies were much more confident of a rise in activity than other countries in Europe (+4%), while firms in Germany and Spain gave negative projections for the next 12 months. The UK firms’ outlook was also higher than the global average of 17%.

Inflationary pressures remain elevated, with 80% of firms expecting to raise their salaries over the next 12 months in light of the cost-of-living crisis and tight labour market conditions. Selling prices are also likely to rise sharply, albeit not quickly enough to offset a negative outlook for profits. Likewise, -13% of firms expect lower earnings over the next 12 months.

At the same time, pessimism about profits has led firms to plan reductions in both capital expenditure (capex) and research & development (R&D) spending. Capex and R&D forecasts were the lowest seen since the drop during COVID-19 in 2020, with net balances of -7% and -8%, respectively.

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