Should businesses look forward to 2024 with confidence in the UK? Compared to the EU and globally almost certainly! 2023 was another tough year for the UK and business confidence has been buffeted by high interest rates and global headwinds, making it hard to want to invest.
The latest Accenture / S&P Global UK Business Outlook indicated a waning of optimism across the UK private sector in October, as firms signalled increased concerns about the impact of higher interest rates and weaker consumer spending. At +37% in October, the net balance of firms forecasting a rise in business activity over the next 12 months was down from +40% in June, signalling a slight drop in the overall level of confidence and the softest reading since October 2022. However, the headline reading indicated a still broadly positive outlook for the coming year. In total, half of all surveyed businesses expect output to rise, compared to just 13% which predicted a decline. While the resulting net balance of positivity was lower than in June, it was still much higher than the record low seen a year ago. It would be understandably easy to lose perspective and forget that the UK's unemployment rate is much lower than the EU mean of 6.8%. Interest rates are coming down and the Chancellor's committment to reward investment through tax offsets should bear dividends. Confidence in the UK also held up compared to elsewhere in Europe, with the euro area net balance dropping nine points to +10% in October. Global business sentiment fell to +25% from +28% in June. Optimism in the UK service sector (+36%) decreased amid growing concerns about the impact of interest rate hikes on consumer spending and borrowing costs. The net balance among services companies was down from +39% in June. On the other hand, businesses noted that softer inflation, new technologies and reduced competition could support growth. By comparison, manufacturers (+44%) were slightly more optimistic than in the previous survey (+43%). Survey panellists often cited new products, technological gains and reshoring opportunities as factors that could strengthen output. Concerns about oil prices, margin pressures and skilled labour shortages were common, however. If businesses can adapt, cut cost and invest then 2024 could be rewarding. Perhaps turkey this year and hopefully goose next Christmas 🔛 🔜 🔝
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