ICAEW/Grant Thornton UK Business Confidence Monitor Q3 2013

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An overview of the Business confidence monitor produced by the ICAEW in association with Grant Thornton UK LLP. Read more about business confidence by sector in this quarter here: http://www.grant-thornton.co.uk/en/Thinking/UK-business-confidence-mapped-by-sector/

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ICAEW/Grant Thornton UK Business Confidence Monitor Q3 2013

  1. 1. BUSINESS WITH CONFIDENCE icaew.com 29 July 2013 Contact: Caroline Florence Q3 2013 ICAEW / Grant Thornton Business Confidence Monitor results
  2. 2. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. Outline • Confidence index top lines • Financial performance indicators – Growth indicators – Inflation & labour market indicators • Regional & sector stories Source: ICAEW / Grant Thornton Q4 2011 Business Confidence Monitor
  3. 3. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 3 Business confidence reaches its highest level since Q2 2010 ICAEW / Grant Thornton Business Confidence Index 8.8 6.4 2.1 11.5 4.8 -3.9 -7.2 -19.7 -25.7 -36.3 -45.3 -28.2 4.8 24.6 25.8 25.5 21.5 11.9 9.6 13.7 8.1 -9.7 -9.3 12 1.1 4.2 12.8 16.7 24 -60 -50 -40 -30 -20 -10 0 10 20 30 40 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 UK Average
  4. 4. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 4 Business confidence has increased now for four consecutive quarters -20 -15 -10 -5 0 5 10 15 20 25 30 35 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 Quarterly change to Confidence Index
  5. 5. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 5 Confidence has risen sharply in recent weeks -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 THREE WEEKS BEGINNING …….. UK BCM CI TREND - 3 WEEK ROLLED (Each point based on c.230) Where the line passes thru 4 vertical grid boxes the change is significant.
  6. 6. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 6 Economy expected to grow by 1.0% in Q3 – this would be the fastest growth since Q2 2010 Quarter on quarter real GDP growth, per cent -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% Q32006 Q42006 Q12007 Q22007 Q32007 Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 QQ growth actual QQ growth estimate
  7. 7. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. Outline • Confidence index top lines • Financial performance indicators – Growth indicators – Inflation & labour market indicators • Regional & sector stories Source: ICAEW / Grant Thornton Q4 2011 Business Confidence Monitor
  8. 8. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 8 Turnover growth expectations are up on the same quarter a year ago…. Turnover, annual percentage change -4 -2 0 2 4 6 8 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months
  9. 9. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 9 … as are profit growth expectations despite no change in reported annual growth compared with Q3 2012 Gross profits, annual percentage change -4 -2 0 2 4 6 8 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months
  10. 10. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 10 Domestic demand growth expectations pick up despite ongoing squeeze on household finances Domestic sales, annual percentage change -4 -2 0 2 4 6 8 Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 … over last 12 months … expected next 12 months
  11. 11. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 11 Concerns that China’s economic slowdown could hit world growth
  12. 12. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 12 Despite challenging global economic backdrop, businesses believe export growth will pick up -4 -2 0 2 4 6 8 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months Exports, annual percentage change
  13. 13. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 13 -4 -3 -2 -1 0 1 2 3 4 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months No sign of an investment-led recovery - capital investment growth still expected to cool over the next 12 months Capital investment, annual percentage change
  14. 14. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 14 Share of businesses reporting customer demand to be a greater challenge holds steady Share of businesses reporting customer demand as greater challenge 0% 10% 20% 30% 40% 50% 60% Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013
  15. 15. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 15 Slight uptick in net share of businesses with raw material stocks above normal Net share* of businesses** with stock levels above normal -20% -15% -10% -5% 0% 5% 10% 15% 20% Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Raw materials Finished goods *Share of businesses with stock levels above normal minus share of businesses with stock levels below normal ** Manufacturing, Construction, Transport & Storage
  16. 16. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 16 Sharp decline in the share of businesses operating below capacity 30% 35% 40% 45% 50% 55% 60% 65% Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Below capacity At capacity
  17. 17. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 17 Outline • Confidence index top lines • Financial performance indicators – Growth indicators – Inflation & labour market indicators • Regional & sector stories
  18. 18. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 18 Reported price growth has declined slightly for two consecutive quarters -1 -0.5 0 0.5 1 1.5 2 2.5 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months Selling prices, annual % change
  19. 19. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 19 Input price inflation lower than a year ago and expected to cool further -1 0 1 2 3 4 5 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months Input prices, annual % change
  20. 20. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 20 Employment growth expected to pick up from current levels Employment, annual percentage change -3 -2 -1 0 1 2 3 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months
  21. 21. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 21 Employment growth picks up among large private companies Employment, annual percentage change -3 -2 -1 0 1 2 3 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Expected 12months fromQ32013 FTSE 350 Listed Large Private Companies SME Private Companies
  22. 22. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 22 Staff turnover remains more of an issue than in 2012 Net percentage balance of firms reporting factors to be a greater challenge to business performance -15% -10% -5% 0% 5% 10% 15% 20% 25% Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q12012 Q22012 Q32012 Q42012 Q12013 Q22013 Q32013 Availability of management skills Availability of non-management skills Staff turnover
  23. 23. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 23 Expected pay growth has been trending up though remains very weak Average total salary, annual percentage change -2 -1 0 1 2 3 4 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 … over last 12 months … expected next 12 months
  24. 24. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 24 Outline • Confidence index top lines • Financial performance indicators – Growth indicators – Inflation & labour market indicators • Regional & sector stories
  25. 25. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 25 Trend of Business Confidence by Region -10 -5 0 5 10 15 20 25 30 35 40 UK AVERAGE London South East (excl London) South West East of England East Midlands West Midlands Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -10 -5 0 5 10 15 20 25 30 35 40 UK AVERAGE North West Northern England Yorks & Humber England Scotland Wales
  26. 26. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 26 Trend of Business Confidence by Sector -10 -5 0 5 10 15 20 25 30 35 40 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -10 -5 0 5 10 15 20 25 30 35 40 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  27. 27. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 27 Construction sector confidence reaches a record high ICAEW / Grant Thornton Business Confidence Index – construction sector 10.3 17.9 9.2 -4.4 13.4 -10.4 -3.8 8.7 15.1 -4 0.3 13.4 9.6 -0.8 -17.3 -24.2 -41.8 -54.2-54.6 -31.7 4.1 8.9 24 14.1 7.6 6.3 -16.5 0 0.7 -6.8-7.6 5.5 -8.1 -3.9 13.8 22.7 31.4 -60 -50 -40 -30 -20 -10 0 10 20 30 40 Q32004 Q12005 Q32005 Q12006 Q32006 Q12007 Q32007 Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013
  28. 28. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 28 Recovery in construction sector confidence suggests worst could be over for the sector ONS index of economic output, by sector, 2007 = 100 80 85 90 95 100 105 Q22003 Q42003 Q22004 Q42004 Q22005 Q42005 Q22006 Q42006 Q22007 Q42007 Q22008 Q42008 Q22009 Q42009 Q22010 Q42010 Q22011 Q42011 Q22012 Q42012 Q22013 Production industries Construction Services
  29. 29. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 29 The services sector has seen faster growth than construction and production in recent years ONS index of economic output, by sector, 2007 = 100 75 80 85 90 95 100 105 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 Transport, Storage & Communication Business services and Finance Distribution & Accommodation and Food Service Activities
  30. 30. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 30 Profit growth – last 12 months -2 -1 0 1 2 3 4 5 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  31. 31. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 31 Profit growth – next 12 months 0 1 2 3 4 5 6 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 6 7 8 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  32. 32. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 32 Capital investment growth – last 12 months 0 1 2 3 4 5 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  33. 33. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 33 Capital investment growth – next 12 months 0 1 2 3 4 5 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  34. 34. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 34 Export growth – last 12 months -1 0 1 2 3 4 5 6 7 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  35. 35. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 35 Export growth – next 12 months 0 1 2 3 4 5 6 UK ALL PRODUCTION Energy, Water & Mining Manufacturing & Engineering CONSTRUCTION Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 -2 -1 0 1 2 3 4 5 ALL SERVICES Retail & Wholesale Transport & Storage Banking, Finance & Insurance Property Business Services IT & Communications
  36. 36. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 36 Employee growth – last 12 months -0.5 0.0 0.5 1.0 1.5 2.0 Banking, Finance & Insurance Manufacturing & Engineering Construction Retail & Wholesale All Production Industries Property UK National Average All Service Industries IT & Communications Transport & Storage Business Services Energy, Water & Mining
  37. 37. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 37 Employee growth – next 12 months 0.0 0.5 1.0 1.5 2.0 2.5 Energy, Water & Mining Retail & Wholesale All Production Industries Banking, Finance & Insurance Manufacturing & Engineering Property All Service Industries UK National Average Transport & Storage Business Services IT & Communications Construction
  38. 38. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q3 2013 Business Confidence MonitorSlide number 38 Trend of Business Confidence by Company Type -10 0 10 20 30 40 UK Confidence Index ALL UK LISTED FTSE 350 ALL PRIVATE COMPANIES Private Companies Large (250+ staff) Private Companies SME (<250 staff) Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013
  39. 39. BUSINESS WITH CONFIDENCE icaew.com Copyright © ICAEW 2013. All rights reserved. Conclusions • Business confidence rose again in Q3 2013, suggesting that the economic recovery is continuing to gain momentum. • The Confidence Index points to economic growth of 1.0% in Q3 2013, the fastest growth since Q2 2010. • Provided the economy does not contract in Q4 2013, GDP this year should grow at its fastest rate since 2010. • Despite pick-up in confidence, businesses are still reluctant to expand capital investment levels – no uptick in capital spending growth expectations. • There are signs that employee pay growth is picking up, though growth levels remain extremely weak and below consumer price inflation. • Construction sector confidence has rebounded strongly – an encouraging sign that the worst may be over for a sector hard hit by the recent economic downturn
  40. 40. A world leader of the accountancy and finance profession BUSINESS WITH CONFIDENCE icaew.com

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