SME Business Confidence Dips

UK Companies Less Optimistic Over Economy Than Before


Steven Beahan, Partner | +44 (0)114 294 7868

The level of confidence in the UK economy among firms has dipped for the first time in six months, according to a new survey.

Accountancy and business advice firm BDO LLP has revealed in its latest Business Trends Report that expectations for economic growth have moderated, although there is still an expectation of growth and increased employment.

The index gave a reading of 105 for August, which - as it was over 100 - still indicated growth. However, it was down from July's 105.1 and as such, marked a slight decline in optimism.

Manufacturing remained the strongest sector for business confidence at a reading of 118.8, but this was also down from the July figure of 119.9, offsetting a 0.1 per cent rise in service sector confidence. The manufacturing situation may owe much to ongoing concerns about the struggling eurozone.

The survey suggested that growth levels may plateau or even decline slightly in the second half (H2) of 2014.

Commenting on the situation, BDO LLP partner Peter Hemington said: "After a strong start, the rest of 2014 is looking increasingly uncertain for UK businesses and manufacturers are being most affected. With anaemic growth enduring in our key trading partner - the eurozone - and external shocks such as the crisis in Ukraine further dampening confidence, no one should be surprised to see UK growth impacted in H2 2014."

He said a possible consequence of a moderating economy could be that the first rise in the base rate takes place later than expected, with current expectations of an increase in the first quarter of 2015 potentially being too soon. Mr Hemington noted that another factor in this decision may be the cooling housing market.
It is the second survey produced so far this month indicating a fall in business confidence.

Last week, the Purchasing Managers Index for services, published by Markit and the Chartered Institute of Purchasing and Supply, revealed that business confidence was at a 15-month low, despite continued growth in the sector. 

Expert Opinion
Recent months have seen growing levels of confidence emerge after what has been a difficult few years for businesses of all sizes. Inevitably, expectations would moderate at some point and this research still suggests that many SMEs still hold some optimism regarding what the future holds.

"It is natural part of business for firms to face challenges and that is why it is necessary for small businesses – which in most cases will not have the same resources and numbers as larger competitors – to have the right support available to ensure they get specialist advice on the matters which are most important to them.

"Legal expertise is a critical part of the mix, with lawyers being able to help on a range of matters tailored to their needs – from commercial property to disputes and employment issues. Regardless of the levels of confidence among businesses, the right support is a must."
Steven Beahan, Partner