Business confidence in the region has rebounded strongly in the past three months, according to an upbeat report.
The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) soared from a low of minus18.4 to plus16.6 in the second quarter of this year. The uplift follows a steadily worsening trend over the previous three quarters in the Confidence Index and comes against a backdrop of official Government figures showing the economy is now in a double-dip recession.
Key findings for Q2 2012 show:-
- Confidence in the region is now at its highest level since Q3 2010
- This strong improvement in confidence suggests the current recession is likely to be short-lived, with quarter-on-quarter growth of 0.6% forecast nationally for the second quarter of 2012
- Firms in the South West this quarter report sales volumes growing over the past year by 4.3%. Not only is this an improvement on growth rates seen in 2011, but it is the strongest year-on-year increase since Q3 2008 – before the recession took hold in the region
- Annual growth in both turnover and gross profits also improved this quarter, reaching 5.1% and 4.7% respectively.
ICAEW South West director Jon Blake said: “Although there has been a large increase in confidence there is still an air of fragility to the economy. Half of businesses reported customer demand being a greater challenge than 12 months ago but the optimism of businesses in the region can be a catalyst for consumer confidence ahead of this party summer.”
Nigel Morrison, senior practice leader at Grant Thornton in Bristol, said: “It is good to see that turnover and profits are growing, albeit at nowhere near the rate we saw pre-recession. Businesses are coming to realise that this is set to be the norm for some time but, that said, we are working with plenty of dynamic companies which are delivering high growth in domestic and global markets.
“There is no escaping the fact that events in the Eurozone continue to cast a dark cloud over the economy and that the on-going Greek crisis – and the fear of contagion in Spain and Portugal – will impact businesses in the South West which export to those countries.”
Firms in the South West this quarter report sales volumes growing over the past year by 4.3%. Not only is this an improvement on growth rates seen in 2011, but it is the strongest year-on-year increase since Q3 2008, before the effects of the 2008-09 UK recession took hold in the region.
Annual growth in both turnover and gross profits also improved this quarter, reaching 5.1% and 4.7% respectively. This is the fastest growth rate for gross profits in 15 quarters, highlighting improving business conditions in the South West.
However, despite faster growth for firms in the region, levels of customer demand remain a key concern. More than half of businesses (54%) report facing a greater challenge from customer demand now than 12 months ago. This proportion is largely unchanged from Q1 2012 but is well above the levels of businesses citing this as a greater challenge through much of 2011.
Expectations for export growth have been strengthening steadily over the past three quarters, with 4.7% growth anticipated over the coming 12 months for firms in the South West. This is the highest expected growth rate since Q1 2011, reflecting the improvement this quarter in business confidence.
Export prospects for the region remain at risk from weak economic conditions in the eurozone; the destination for 57.3% of the South West’s goods exports in 2011. However, stronger export growth over the coming year will provide a boost to the local economy.