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Slowing demand hitting firms

Scottish confidence suffers one of biggest falls in UK

Wireline industryBusiness confidence in Scotland is among the lowest of any part of the UK, according to a report from Lloyds Banking Group.

Nine regions have experienced a decline, with the south east suffering the biggest fall, down 17 points to 34%, followed by Scotland, down 14 points to 31%.

Overall business confidence over the next six months is lowest in Wales, the North East and Scotland, while it is highest in Yorkshire & the Humber, and Gloucestershire, Oxfordshire & the South Midlands.

Weaker demand at home and abroad is the biggest threat to the fortunes of 1,500 companies surveyed for the latest Business in Britain report from Lloyds Bank.

Now in its 24th year, it showed that just under a third of firms (31%) identified weaker UK demand as the main threat to their business over the next six months – against 29% in July. This was closely followed by a rise in the proportion of exporters who cited weaker overseas demand as the biggest threat to their business – a rise from 23 to 25%.

The net balance of exporters expecting an increase in total exports across the globe fell by 11 points to 35%, reflected by relatively large decreases in firms’ intentions to export to Europe and Asia Pacific.

Exporters stated that they were more concerned about the negative impact of the strength of the pound against the euro than the US dollar. Over a third of firms (34%) said that the value of the pound against the Euro was having a negative impact on their exports, while over a fifth (21%) said the same for the value of the pound against the dollar.

Tim Hinton, managing director, mid markets and SME banking, Lloyds Banking Group, said: “Business confidence has slipped back slightly as companies see slowing demand as a threat to their business in 2016, both at home and abroad.

“Global economic conditions are causing concern in the short term, with sterling’s strength against the euro causing issues for exporters. However confidence levels remain close to recent highs, especially on the back of three years of economic growth.

“Businesses should continue to be prepared for interest rate rises and currency fluctuations, with the recent decision by the US Federal Reserve a reminder that this benign environment is not here to stay.”

The cautious outlook in the survey contrasted with the more upbeat findings in the latest CBI Growth Indicator.

The survey of 766 respondents, which comprises economic activity across manufacturing, retail and business & consumer services sectors, found growth improving in December over the previous month.

The balance of firms reporting rising output was +20%, compared with +13% in November, well above the long run average of +5%.

Recovering growth across the retail and wholesale sectors was buttressed by a strong year end among business and professional services, though manufacturers, especially exporters, continue to face difficult times.

Overall, the economy is expected to grow at a similar pace over the next three months (+20%), well above the long-run average (+10%).

FairbairnCarolyn Fairbairn, CBI Director-General, (right) said: ‘The UK economy has finished the year strongly, with business services acting as a lightning rod for growth.

“Nonetheless, there is no room for complacency in 2016 as significant challenges to global growth remain. Many emerging markets are facing a testing time, with China moving to a slower growth path and other emerging economies being buffeted by low commodity prices, capital outflows and currency depreciation.

“The picture differs markedly by sector. Manufacturers are having a tough time, with the strength of sterling hitting their competitiveness in the Eurozone and the slowdown in emerging markets weighing on export demand. And the North Sea industry and its suppliers are feeling the impact of falling global oil prices.

“Ultimately, employers want relief from the cumulative burden that could harm the UK’s competitiveness, as the combined effect of the introduction of the apprenticeship levy and the national living wage begins to bite against the backdrop of unreformed business rates and the administrative challenge of pensions enrolment.”



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