UK business confidence falls to lowest in 2023 despite easing inflation - YAHOO FINANCE
UK business confidence tumbled to its lowest level this year in October despite inflation expectations easing. It was the second successive fall thanks to concerns about the cost of living and elevated interest rates.
According to the latest quarterly UK Business Outlook from Accenture and S&P Global, the net balance of firms expecting activity to increase over the next 12 months slid to 37% in October, down from 40% in June and 43% in February.
Worries about the effects of interest rate hikes on consumer spending and borrowing saw optimism in the UK service sector fall to 36%. Hospitality businesses felt the brunt of this impact, standing out as the sole sub-sector that did not report a positive sentiment.
Manufacturers reported a modest increase in optimism — up to +44% — with notable positivity from the transport and food and drink sectors.
Many manufacturers highlighted their expectations that new product launches, technological advancements, and reshoring prospects might bolster their output.
The survey also revealed that firms expect cost inflation to slow, meaning they will raise prices less steeply. However, wage growth expectations remain near record levels.
Higher interest rates are also weighing on investment plans, with slightly more firms expecting to cut research and development (R&D) expenditure in the upcoming year.
But the report, which polled 12,000 businesses, including 1,400 in the UK, showed that UK firms are more optimistic than their international rivals.
Business confidence in Britain still remained relatively high compared to the global average of +25% and the European average of +16%, which fell by 3% and 9% respectively.
"It's no surprise that corporate confidence has wavered in the face of ongoing change, with wider economic challenges impacting interest rates and high prices putting a dent in consumer spending,” Ewan Mackay, strategy and consulting lead at Accenture in the UK and Ireland, said.
"While projections for the next 12 months remain positive, it's important that businesses take action now to turn expectations into reality even if the economic picture remains uncertain. Now is the time to stay the course with strategic investments where possible, hiring the best skills and embedding the right technologies throughout the core of their business to position them for future growth."
It comes as the UK economy slid into stagnation in the third quarter of the year.
Gross domestic product (GDP) rose by 0.2%, showing no change from August's figures, according to the Office for National Statistics (ONS).
Despite the weak figures, Britain managed to avoid a recession this year, which is defined as two consecutive quarters of negative GDP. Economists had predicted that the economy would shrink by 0.1%.