UK business confidence steady despite Brexit fears - ACCA survey

The survey, the largest regular economic survey of accountants around the world, found that global business confidence is at its highest in twelve-months, with OECD countries anticipating a rise in government spending, a four-year confidence high in China leading to an uplift in emerging markets and the US continuing a stable recovery.

With protectionist sentiments on the rise across many nations, the US presidential elections in November could have a significant impact on whether this improving confidence translates into genuine increases in employment and investment.

Faye Chua, head of business insights at ACCA, points out that despite the UK vote to leave the European Union, business confidence has so far held steady.

She said: “In the UK, confidence has held up in the wake of gloomy predictions – this may be partly linked to greater willingness from the incoming administration to loosen the purse strings (despite a high budget deficit) and rate reductions from the Bank of England to pre-empt a slowdown.

“Yet we must remember that, despite perceptions, the process of Brexit has not begun yet and that overall the UK represents only 4 per cent of global trade GDP. Nearly 60 per cent of global respondents said that they had not been affected by the vote.”

Ms Chua said that the survey highlights the importance of governments supporting growth and their increasing realisation of the limits of monetary policy: “Over 51 per cent of global respondents expected government spending to rise, which has driven global business confidence to the highest point in over a year. After years of reduced investments in most Western economies, a combination of falling budget deficits and bond yields is encouraging governments to reach for their wallets. This is good news for business in a continued depressed climate for investment and hiring.

Yet Ms Chua says that despite improvements in confidence, the world is yet to see it translate into a meaningful boost to hiring and investment: “Only 19 per cent of firms said they are considering hiring new staff, and only 14 per cent said they are looking at opportunities to invest in new technology. In every region, there were more businesses planning to cut staff than those planning to hire more.

Ms Chua added that there could be bigger challenges ahead for the global economy in the next quarter: “The World Trade Organisation is reporting record levels of trade restrictions between nations, and there has been a pronounced protectionist turn in the US presidential elections with regard to trade.

“The outcome and response to that election, together with the prospect of Brexit negotiations drawing closer, will provide a test of this fragile confidence.”