Business confidence plunges as Brexit anxiety mounts

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British business confidence has plunged to its lowest level since the dark days of the 2008 financial crisis, according to the latest iteration of the ICAEW’s business confidence monitor.

Business confidence has fallen for the second quarter in a row and is now firmly negative. Confidence has fallen to -12.3 this quarter, its lowest level since Q2 2009. Brexit anxieties, reflecting lack of progress in the negotiations, are a likely reason.

Confidence is now lower than it was following both the 2016 referendum and the 2017 general election. According to the ICAEW, the decline in confidence this quarter set-in immediately after the prime minister’s disastrous meeting with other EU leaders in Salzburg, where her ‘Chequers’ Brexit plan was brutally and publicly rejected.

The ICAEW report stated that confidence remained low afterwards amid uncertainty regarding whether any Brexit deal can be devised that will satisfy both EU leaders and British politicians. “Although history suggests that declines in business confidence tend to reverse themselves, it is not possible to say how quickly that will occur in this case.”

The decline is widespread across most sectors and all regions, and is shared by both quoted and unquoted companies, and larger and smaller businesses. Confidence is in negative territory in every region, with the South West, Scotland, Northern England as well as West Midlands showing the greatest concerns.

London sits at the least pessimistic end of the range, likely buoyed by the City’s robust IT and communications and business services sectors.

“Leaving the EU and its potential impact is at the front of everyone’s minds,” said Sharron Gunn, the ICAEW’s executive director. “This is a difficult time to run a business, let alone finance the major investments the UK economy will desperately need post-Brexit to drive growth. The Budget offered some relief to business but more significant action is needed by government to provide stability and reassurance.”

The ICAEW report’s bleak outlook gels with the conclusions presented by another study from the Chartered Institute of Management Accountants (CIMA).

The results from CIMA’s survey of 1,496 UK finance professionals display a pronounced Brexit anxiety among British businesses. Over a quarter (27%) expects profit to be flat in 2019 as a result of Brexit, with only 5% forecasting an increase.

When asked about the impact Brexit is having on their 2019 forecasts more than half (58%) said their business has forecasted an increase in costs, with half (49%) expecting costs to rise by between 1 – 10%, and one in ten (10%) expecting an increase of more than 10%.

Nearly half (42%) said they are being less ambitious with their 2019 revenue forecasts due to Brexit. Furthermore, 14% expect to spend more than £1m on Brexit planning, while a third (33%) expect Brexit to have a continued impact on finances beyond 2020. Three quarters (75%) said they are concerned about the possibility of a no-deal Brexit, with 40% being very or extremely concerned.

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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08th Nov 2018 10:11

Who says that Brexit is the "likely" reason? Pure speculation. Did Sterling purposely trip himself up because of Brexit? Perhaps, maybe, probably. Who would have put money on United beating Juventus? Time to get real. Brexit will have no effect on our trade. I have a couple of international companies on my books and their counterparts in the EU says whatever happens they will still continue to trade (It's their livelihood as well). So media take note, Trump will get a second term and Brexit will go through without too much hassle.

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By k743snx
08th Nov 2018 10:17

Well, if people will keep talking things down....

I smell vested interests at work. The FT is one of the biggest villains in spreading panic.

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By Rozzo52
08th Nov 2018 11:16

I do not understand this at all. Leaving EU means that instead of having to pay the costs for maintaining two bureaucracies namely the UK and the EU all business in UK will now only have to pay for UK bureaucracy also there will no longer be a yearly subscription to be part of EU club of £10's of billions. Also we will have complete control over our tax affairs including being able to reduce taxation levels without EU interference. In my view just some more scare mongering by political elite, establishment, the BBC , Main Stream News Media nothing changes.

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09th Nov 2018 09:29

I think the main problem with all this is the ideology of the EU, everything under one roof, which suites big business. However the European people do not agree, hence the "wave" of nationalism. The EU need to drop this ideology and come up with a European plan that allows joint ventures (trade etc.), movement of labour and a properly organised migration policy. Trump has got the right idea on this. Only allow migrants to come in controlled border crossings so that they can be organised. Of course you won't be able to stop the illegals unless you spend loads more money on security.
I would really welcome a European "peoples" referendum as to the way forward. Perhaps then Europe might get something that benefits everybody.

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09th Nov 2018 13:18

Same old story, not a lot changes, no matter what the financial climate, remember the millennium, we were told computers could get confused and start WW3, afterwards so called experts advised 'who said that' you did you so called expert.

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09th Nov 2018 18:42

Like the doom mongers and sore losers down at the Peoples Vote campaign who spend their days gazing into half empty glasses desperately searching for poor economic news that they can blame on Brexit many business people need to recognise that change brings opportunities. In fairness some executives (Tim Weatherspoon,Lord Digger and the Dyson chap to name a few) do recognise this but their optimism seems to be eclipsed by those who consider the world evolves around Paris and Frankfurt.
The World is never certain but the UK with its rule of law, low tax environment and skilled workers has much to offer. Let's make the best of it.

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