Business confidence falls as profit growth weakens

| August 22, 2011
Business confidence falls as profit growth weakens

Confidence among British businesses has declined as both UK and global economic turmoil impact on firms’ plans for the future.

The latest ICAEW/Grant Thornton UK Business Confidence Monitor shows confidence at its lowest level since the third quarter of 2009, when the UK was still in recession, with firms seeing turnover and profit growth weakening and revising down future expectations.

In particular, private sector employment growth is under threat due to rising input prices, which are 3% higher than a year ago, while selling prices have increased by only 1.2% over the last twelve months, increasing pressure on profit margins.

According to the research, staff numbers are just 0.3% higher than last year and salaries are up only 1.6%, despite rising inflation.

At the same time, an increasing number of businesses see tax and red tape as major challenges, with 40% believing regulation is a greater burden than 12 months ago.

ICAEW chief executive, Michael Izza, comments: “Businesses are doing their best to grow the economy in a tough climate, but they feel little progress has been made on tackling regulation and improving tax competitiveness.”

Grant Thornton chief executive officer, Scott Barnes, adds: “There is little surprise that confidence among the businesses surveyed has fallen … although businesses are predicting growth in turnover, exports and profits, the fragility of our largest overseas markets is worrying.”

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