Welsh business confidence has fallen back into negative territory, after beginning to improve last quarter, according to the latest ICAEW Business Confidence Monitor™ (BCM). A snap general election, the hung parliament and the hesitant progress of negotiations with the EU has meant Welsh businesses are now adopting a more cautious, wait-and-see approach.
Q3 2017 Key Findings:
- The confidence index for Wales has dropped back in Q3 2017 to -10.2.
- Input price inflation has accelerated sharply over the last year.
- Profits growth has been protected by upward trends in both domestic and export sales. The former improved to 4% per year in Q3 2017, against 2.7% a year ago, and exports from 0.5% to 2.8%. This has resulted in robust profits growth of 3.5%.
- Looking ahead, domestic sales are predicted to slow in the coming 12 months, to 2.9% per year. But selling price rises of 1.5% and an easing in input price inflation to 2% will help keep profits growth at close to 3%.
- On the other hand, investment plans are modest, as they have been for over a year. This is a reflection of the uncertainty in the broader economy.
- Capital expenditure is set to slow to just 0.9% per year after a strong year to date, with staff development budgets growing at 1.3% and R&D at 1.7%.
Martin Warren, Director of ICAEW Wales said:
“This fall back into negative territory is not unexpected, 2017 has been full of political uncertainty from the snap UK General Election to continuing questions over the progress of Brexit negotiations with the European Union. Here in Wales we have seen the cancellation of the planned rail electrification between Cardiff and Swansea, businesses may be interpreting this as a reason to expect domestic sales to slow over the next year. There is still no clear signal from the UK Government towards its post-Brexit policy and business is finding it hard to see through this haze of uncertainty. Investment planning across the country has been slow for some time and looks set to remain that way, suggesting that firms are struggling to look further than the end of the next quarter in terms of their decision making.”