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   North West Business Confidence slumps to lowest level since 2009
Business confidence has slumped to its lowest level since the depths of recession in 2009 according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM). The BCM Confidence Index in the North West region has fallen to -10.5 from a Confidence Index of 6.4 just three months ago. The score is a massive decline on the post-recession high of 24.3 in Q1 2010. The survey, which questions senior business professionals in the North West, also revealed that firms across the region have revised down their projections for growth with turnover expected to expand by an average of 3.2% over the next 12 months, down from a forecast of 6.1% growth over the 12 months to Q2 2011. The BCM has also suggested that the tax burden has become more of an issue for North West business over the course of this year. One in three businesses in the region (30%) now report the tax burden to be a greater challenge than 12 months ago - more than double the share of businesses who were of this opinion in the same quarter last year (13%). However, it is not all bad news. Turnover for North West businesses has actually seen growth by an average of 2.7 per cent over the last 12 months and exports in the region are still on the up having grown by 4.2% on average over the last 12 months – the highest reported growth rate since Q4 2008. Domestic sales have also expanded, by 2.5%, a rate which is modest compared to levels seen before the recession but which is nonetheless expected to continue over the coming 12 months. Melanie Christie, ICAEW North West Region Director, said: “These latest figures show that North West businesses have played their part in supporting economic growth and many are proud of their success against a backdrop of a very slow and protracted recovery. Yet they are becoming increasingly worried about the immediate outlook and the risk of a double dip recession. They are looking to Government which now needs to take urgent steps to restore business confidence and to show that it understands the need to rapidly change the mood music that the business community clearly feels.” David Grundy, North West managing partner of Grant Thornton, said: “There’s no doubt the Eurozone crisis is having a corrosive effect on business confidence. In recessions people have become accustomed to the idea of corporates struggling with difficult market conditions. Sovereign debt is something else entirely and unprecedented in our generation. There are concerns about the scale of the debt in Italy, Portugal and Spain, on top of the profound issues already evident in Greece and Ireland. The UK would not be immune from any escalation in the current crisis – and people are aware this kind of financial contagion can certainly create balance sheet problems for European banks. “That said, there are definitely some encouraging trends across the North West. We are continuing to attract inward investment as a region and the coalition’s back-to-basics programme of infrastructure investment will do a lot to increase the productive capacity of the economy over the medium and long-term. “SMEs in particular need to feel more confident about getting back out there, and there are plenty of developments in the pipeline which will encourage this as we move into 2012.” Growth forecasts continue to fall This quarter, businesses in the North West report turnover has grown by an average of 2.7% over the last 12 months, unchanged from Q3 2011. However, annual growth in gross profits has fallen from 3.1% over the 12 months to Q3 to 1.9% over the 12 months to date. Firms have also revised down their projections for growth. They expect turnover to expand by 3.2% over the next 12 months, down from a forecast of 6.1% growth over the 12 months from Q2 2011. Similarly, firms expect lower rates of growth for gross profit and sales volumes over the coming 12 months, with a forecast of 2.4% for gross profit (down from 4.5% in Q2) and 3.8% for sales volumes for Q4 (down from 5.2% for the year from Q2 2011). Overall, financial performance expectations in the region have continued to fall in line with the sharp fall in business confidence, as the global economic outlook has weakened in recent months. Exports growth expected to weaken Businesses in the North West report exports have grown by 4.2% on average over the last 12 months – the highest reported growth rate since Q4 2008. However, firms have revised their expectations for export growth down sharply from 4.8% for the 12 months from Q3 2011 to 3.0% for the coming 12 months. This is the weakest forecast for export growth since Q2 2010. Firms in the region report that domestic sales expanded by 2.5% over the last 12 months. This is a fairly modest rate of growth compared to levels seen before the recession, and firms expect growth to continue at this rate over the coming 12 months. Even so, supermarket chain Waitrose has said it plans to open at least 10 new shops in the North West in the next five years, creating 1,500 jobs. The retailer said it aimed to spend £100m on new sites in the region, including a £35m distribution centre in Chorley, Lancashire, to open in 2012. Transport infrastructure cause for concern Over the course of 2011, the proportion of businesses apparently concerned about the transport infrastructure has been increasing. This quarter, nearly one in three firms (28%) report transport problems to be a greater challenge to business performance than 12 months ago, up from 16% in Q4 2010. The European Investment Bank has agreed to provide a £500m loan to facilitate the expansion of Greater Manchester's Metrolink network. This Metrolink expansion is the single largest investment in public transport in the UK, outside of London. In addition, BCM suggests the tax burden has become more of an issue for North West business over the course of this year. One in three businesses in the region (30%) now report the tax burden to be a greater challenge than 12 months ago, more than double the share of businesses who were of this opinion in the same quarter last year (13%).
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