Business profits set to grow, despite lack of confidence

Says ICAEW

Key findings for Q4 2017:

• Although the Business Confidence Index remains in negative territory, it improved from the shock of the General Election from -8 in Q3 to -3.4 in Q4 2017
• Profits growth has seen an improvement rising from 3.4 per cent in Q3 to 4.1 per cent this quarter. This is expected to increase to 4.7 per cent next year – consistent with rising sales and a slowdown in input price inflation.
• Slow GDP growth is forecast for Q4 at 0.2 per cent, which follows ONS figures of  0.4 per cent growth in Q3 2017
• Domestic sales growth remains steady while export sales are slowly improving with higher growth expected in the year ahead
• Businesses expect continued job creation but salary increases remain steady indicating that a price-wage spiral is not a major risk

Michael Izza, ICAEW Chief Executive, said:  

“While businesses are struggling to be confident in the current environment, there are reasons to be more optimistic. Businesses are controlling costs and there is finally some improvement, though small, in export sales growth. The IT, Construction and Business Services sector are all modestly positive. Even the retail sector has seen an improvement in confidence – albeit still in negative territory.

“These findings highlight the cliff edge that the UK economy is on at the moment.  The recent interest rate rise was not unexpected but any sudden shocks from the Chancellor at the Autumn Budget could have a serious impact. Businesses to some extent know that uncertainty is to be expected due to Brexit but they must again see good reason to invest in technology, training and development, as well as new products and services to help drive economic growth in 2018 and beyond.”