Business confidence plunges as Brexit anxiety mounts

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.