Business confidence still shaky - September 2011
‘Business Confidence’ is a delicate flower. Economic growth depends on the trust that individual businesses have in each other and in the general economy. The role of Government is critical in this regard, and it is essential that they send the right messages to commerce – especially at this stage of the economic cycle.
Re-building business confidence after the credit crunch and the subsequent downturn is essential for the Governments’ strategy of private sector jobs being created to offset those lost in the public sector through funding cuts. Without that confidence returning to the markets, the private sector will not invest and take on staff. So, what are recent surveys saying about the state of business confidence in Scotland?
The recent Institute of Chartered Accountants/Grant Thornton UK Business Confidence Monitor Report for Quarter 2 for Scotland reports as follows: “Confidence in Scotland, having been above the UK average for 10 successive quarters, weakened further this quarter, to move in line with the UK as a whole”. Scottish business confidence had fallen 4 points and the rest of the UK had risen by 4 points – now matching at around plus 13.
The small print in the section of the report regarding Scotland, goes on to say “Despite weakening confidence, Scottish Firms’ forecasts for growth in turnover, gross profits and sales volumes have strengthened…”. Of course it is the last period’s stronger confidence which is producing this period’s stronger results for financial performance, export growth, and employee numbers. Will declining confidence lead to weakening of results in the future? Not according to the report which identifies increased turnover, sales and exports for the next 12 months. Only profits are expected to dip – but that might be important.
The British Chambers of Commerce Quarterly Economic Report for the second quarter of 2011, with twice the sample size, reports business confidence stuck around the plus 10 to plus 20 mark since the end of 2009 at the UK level.
The disaggregated figures for Scotland within the manufacturing sector, show more confidence in turnover growth, (a 7 point swing to plus 35 weighted from Q1) than in improved profitability (static at minus 12 weighted). Services continue to lag behind with confidence about turnover growth dropping 36 points to minus 39, weighted, from Q1.
The survey also shows where Scotland is ahead of the UK in manufacturing sector sales – ahead 28 points at plus 46 in domestic sales and ahead 4 points at plus 30 in export sales; and where services sector sales are lagging the rest of the UK – down 37 points at minus 27 for domestic sales and down 26 points at minus 14 on employment expectations.
This may tell us that Scotland has a twin-speed economy, with export-dependent manufacturing doing well with a devalued pound and a quality product, and an overly public-sector dependent services sector starting to struggle just at the time that the rest of the UK is starting the climb out.
The reality for this recession may be that there is no common experience – the downturn is proving to be a different experience for every organisation – and, as ever, the strongest, best-managed, or just the luckiest, do well and prosper. Good due diligence to make sure that you have good trading partners is more important than ever.
The ‘business confidence’ experience of most members of the Chamber, is that if they can win the work, and crucially get paid on time, and have a bit of fat left to live off, then they are likely to emerge leaner and stronger from this recession with reliable partners in place and a hunger to win more business.
What doesn’t kill us makes us stronger . . . |
