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Business optimism in UK hits lowest point since 2009

UK construction
Britain   Business optimism in China is also the lowest since 2009

October data from the IHS Markit Business Outlook survey signal that UK private sector companies have become less confident about the year-ahead growth outlook in comparison to those reported in the summer.


The net balance of firms anticipating a rise in business activity in the coming 12 months is +32%, down from +39% in June.

Levels of optimism have gradually eased since the peak seen in February 2014 (+66%).

Moreover, the latest reading indicates that the degree of confidence is the lowest since composite data were first compiled nine years ago, exceeding the previous survey-record low seen during October 2011 (+33%).

A moderation in UK business expectations mirrors the weaker trends seen across the euro area in the latest survey period, but contrasts with the resilience seen in the US.

Meanwhile, latest data reveal that business optimism in China is also the lowest since 2009.

UK manufacturers and service providers widely link weaker confidence to Brexit-related concerns and worries about a ‘no deal’ outcome for EU negotiations.

A number of manufacturing firms also cite global trade frictions and softer automotive sector demand as factors likely to hold back growth.

Meanwhile, staff shortages and higher operating expenses remain a key concern for service sector companies over the coming 12 months.

At +15% in October, the net balance of UK private sector firms expecting to boost their employment numbers is down markedly from +23% in June and the lowest since February 2013.

Weaker job creation plans are most pronounced in the service economy (+13%, down from +23% in June).

Survey respondents note that a combination of rising payroll costs, shortages of skilled candidates and softer business activity growth are likely to hold back recruitment over the year ahead.

The net balance of UK private sector firms expecting to boost their capital expenditure in the next 12 months is +1%, down sharply from +10% in June.

Moreover, the latest figure is the lowest since October 2011 and the weakest of all nations monitored by the global business outlook survey.

Input cost expectations are unchanged from those seen in June, with a net balance of +44% of UK private sector firms anticipating an increase in their operating expenses.

Stronger input price projections among manufacturers are offset by a slight moderation across the service economy.

Meanwhile, manufacturing companies are much more likely to anticipate a rise in their output charges (+53% in October) than firms operating within the service sector (+31%).

October data signal that profits expectations have moderated across the UK private sector.

At +18%, the net balance of firms predicting growth is down from +24% in June and the lowest for almost one-and-a-half years.

Manufacturing companies remain more upbeat about the profits outlook (net balance at +31%) than businesses operating in the service economy (+16%).

 

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