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South East: Business confidence rebounds after Brexit vote

26 June 2017
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Business confidence in the South East rose to an 18-month high in the past six months, according to the latest Business in Britain report from Lloyds Bank, based on data gathered after the snap election had been called.

The confidence index – an average of respondents’ expected sales, orders and profits over the next six months – increased to 28%, from January’s score of 15% and from 10% immediately following the EU referendum vote.

The Business in Britain report, now in its 25th year, gathers the views of more than 1,500 UK companies, predominantly small-to-medium sized businesses, and tracks the overall 'balance' of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

The South East is one of the most confident regions across the UK. Businesses in the region outstripped most of the country, including London, although it falls behind Wales and the North East.

The confidence index is an average of respondents’ expected sales, orders and profits over the next six months. It calculates the ‘net balance’ - the difference the percentage of firms that are positive in outlook against those that are negative. It can vary between -100 if all firms are negative and 100 if all firms are positive, 0 is neutral.

Mark Burton, managing director for mid-markets in the South East, Lloyds Banking Group said: “Overall confidence in the South East has increased since our last survey in January, and has risen significantly since our report last September.

“The fact that this has happened despite the political uncertainty from a snap election is a positive sign for underlying confidence in the region and is a testament to firms’ resilience here in the South East.”

Recruitment difficulties emerge

Overall, compared to figures reported in January, the share of South East firms naming economic uncertainty and weaker UK demand as potential threats fell significantly to 16% (Jan: 31%) and edged higher to 18% (Jan: 12%) respectively.

The proportion of South East firms that said that they had experienced difficulty in recruiting skilled labour in the past six months, however, increased to a 10-year high of 52%, compared with 30% in January.

The share of firms reporting challenges in recruiting unskilled labour also rose to 23% from 15%.

Despite recruiting challenges, the net balance of firms expecting average pay to rise in the next six months fell only slightly to 19% from 17%, suggesting companies are taking a cautious approach to hiring and pay.

Burton added: “Despite hurdles in recruiting skilled labour, South East businesses anticipate sales, profits and staffing levels to rise.

“The outlook for the external environment remains mixed, with details of Britain’s exit from the EU still to come but businesses have been working within those parameters for a while now. For the moment, South East businesses are taking this in their stride until there is a clearer sense of what it will mean for them in the short and medium term.”

Improved outlook for export prospects

South East companies were more positive about export prospects.  The net balance of firms in the region expecting higher total exports in the next six months rose to 32% from 25%, the highest level since September 2016. They were most upbeat about export prospects to Africa, expecting no change in activity, but the share of companies expecting to increase exports to Europe declined from January’s findings.

Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “Although the pound’s value is seen as nearer ‘fair value’, currency volatility remains a big concern for some UK businesses that trade internationally. We have already seen some significant currency moves after the general election.”


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