Worries about the EU referendum in June, rising labour costs and China’s slowdown have knocked UK business confidence to a four-year low, according to a report that will fan fears the economy is losing momentum.
A poll of 1,000 chartered accountants by their professional body, the ICAEW, echoed other recent surveys pointing to fragile consumer and business confidence as the referendum approaches. The poll also noted a slowdown in domestic sales and nervousness about hiring new staff.
The main reading on the ICAEW/Grant Thornton UK business confidence monitor dropped to 0.8 from 11.4 in the previous quarter and was the lowest since early 2012 when economic growth was grinding to a halt.
The report pointed to several factors weighing on sentiment and predicted economic growth will slow further in the coming months. The latest official data showed GDP growth had already dipped to 0.4% in the first quarter from 0.6% in the final three months of 2015.
“Business confidence is fragile and there is an absence of resilience in the UK economy at the moment. A combination of factors has led to this negativity and includes the EU referendum, slowing domestic sales, Chinese growth slackening and the recent budget,” said the ICAEW chief executive, Michael Izza.
“Businesses cannot plan with confidence and this applies regardless of sector, ownership or size of company. Weakening growth will also mean lower tax receipts for the chancellor, making it even harder for him to meet his deficit goal.”
The group said the latest drop in confidence suggested GDP will expand just 0.3% in the second April-to-June quarter. That chimes with a recent Bank of England prediction that growth will likely falter as companies defer spending decisions until after the 23 June referendum, which polls suggest will be close run.
The survey of chartered accountants found companies’ export sales had improved thanks to a weaker pound, which makes UK goods cheaper for overseas buyers. But it said sales growth in the UK had “slowed significantly”.
It highlighted new costs for employers from the recently introduced national living wage and auto-enrolment rules on pensions. The poll found skill shortages were less of a problem for businesses than 12 months ago but that employment was expected to slow this year. Salaries were predicted to rise by 2% over the next year.
There were further signs of pay pressures in separate figures showing salaries listed in job adverts had flatlined in March.
The jobs search website Adzuna said political uncertainty appeared to be making employers more cautious as it reported that the average advertised salary was £33,815 in March, unchanged from February and down 2% on a year earlier.
Adzuna’s jobs market report, which is based on all online job adverts in the UK, found that in all regions, except Northern Ireland, advertised salaries fell year-on-year in March.
“It’s a time of turbulence for the jobs market. Unemployment is climbing and political uncertainty could well be impacting hiring plans,” said Adzuna’s co-founder, Doug Monro.
“In particular, recent reports indicate hiring permanent staff may be being put on pause until after the EU referendum as employers turn to temporary workers to fill gaps.”
