New research from the Grant Thornton International Business Report (IBR) reveals that UK business leaders remained highly optimistic over the UK’s economic prospects during the third quarter of 2014.
The IBR confirms that UK business optimism has remained buoyant in the last three months, reaching 82% – just 1% below the all-time high reached in the first quarter of the year and a 35% year-on-year increase, placing UK business leaders as the second most optimistic globally in the 34-economy survey.
The report also finds a record 85% of businesses say they expect to offer their employees a pay rise within the next 12 months, whilst concerns over a lack of skilled workforce persist, reaching a record 28% in the third quarter. The report also finds that access to finance remains a concern for 14% of businesses.
Chris Frostwick, Partner and Practice Leader of Grant Thornton UK LLP in Leicester, commented: “Perhaps one of the most telling findings is the expectation about pay rises. You can argue whether this is a defensive measure in the face of identified skills shortages, or a positive statement about confidence in an expanding economy, but either way these rises will feed back into the economy, with all of the benefits that this brings after a long period of flat wage growth.”
The statistics, informed by the views of over 120 senior UK business leaders, also suggest that economic uncertainty remained a low concern for businesses over the last three months, with only 16% of businesses citing this as a worry.
British businesses were also the most upbeat over future demand for their products and services, with only 14% of businesses citing a shortage of orders or reduced demand as a major concern. However, a slight reduction in export expectations – to 28% over the period, versus the record high of 34% seen in the previous quarter – suggests demand is largely domestically focussed, as uncertainty remains in more traditional markets; reinforcing the need for greater government support in this area.
Scott Barnes, CEO of Grant Thornton UK LLP, commented: “Despite the period of political uncertainty in the lead-up to the Scottish referendum, business leaders on both sides of the border kept their composure and focused on the current economic realities. Undoubtedly, they’ll have been watching the vote closely and have prepared themselves for any eventuality. As the conversation now shifts towards devolution, and with so much potential still to be unlocked, it remains critical that the voice of dynamic mid-market businesses is heard; and that they’re offered the chance to help shape those discussions for an outcome which benefits business, government and the wider economy in equal measure.”
Barnes continued: “Although the overall picture for UK businesses has improved considerably over the past year, some of the fundamental pillars of sustained growth still remain fragile. For the UK to really capitalise on current momentum and cultivate a business environment that’s fit for the long-term, a lot more work will need to be done – particularly by the Government – to better support the UK’s crucial mid-sized businesses (MSBs) which are powering the economy.
“By expanding the efforts of UKTI to further help these firms get their products into new markets; addressing the skills shortage through financial and tax incentives for MSBs to take on and train even more apprentices; and introducing initiatives to ease the financing shortfall, such as reintroducing the corporate venturing scheme, the Government can truly unlock substantial growth potential. This, in turn, would then translate into increases in jobs, income, quality of living and other signals of a healthy, diversified and sustainable economy.”