Business confidence down most among SMEs

The latest quarterly survey of business confidence from the Institute of Chartered Accountants in England and Wales (ICAEW) shows business confidence down for the first time since the first quarter of 2009 – the middle of the recession. The confidence figures indicate the economic recovery will slow down in the second half of 2010, with the chief executive of the ICAEW saying there was “a degree of uncertainty among business leaders on what the future holds”.

The group most worried by the downturn are small and medium sized enterprises (SMEs), amongst whom confidence has fallen seven points to +18 in the ICAEW/Grant Thornton Business Confidence Monitor  Q3 2010 Confidence Index. Last month, Left Foot Forward reported business secretary Vince Cable’s lack of action on getting banks to lend more to SMEs; an estimated 4.8million SMEs account for more than 50 per cent of private sector employment and turnover – these businesses are the driving force of the economy.

Amongst listed companies, confidence is down six points to +23, amongst FTSE 100 and mid 250 companies confidence is down three points to +24, and amongst all private companies confidence is down five points to +19. Confidence amongst large private companies, however, has increased slightly, up one point to +21.

By region, confidence is down sharply in the South East and in Northern England, by 20 points to +10 and by 22 points to +6 respectively, with business confidence in London, East England, East Midlands, West Midlands, York & Humber and Wales also down. Only the South West, North West and Scotland saw modest increases.

And by industry, confidence in the manufacturing & engineering and transport, storage & communications sectors is up, remains stable in the property sector and is down in the banking, insurance & finance, business services and retail & wholesale sectors.

Michael Izza, chief exec of ICAEW, said:

“What the economic impact of the cuts in public spending will be is still unclear. Government needs to ensure that the action it takes doesn’t undermine the recovery. More importantly, it needs to deliver on its commitment to ensure that the UK is truly open for business and investment. It must do all it can to promote economic growth as a means of delivering long-term economic stability.”

While Douglas McWilliams, chief exec of the Centre for Economics and Business Research (cebr), said:

“Business confidence has weakened significantly as businesses acknowledge the path to recovery contains further challenges, with a fast return to strong growth by no means guaranteed.

“Currently the UK economy is running at more than 4% below pre-recession levels. The public sector cuts outlined by the new Government and consequent reduction in public sector demand will have a signifi cant downward effect on growth, constraining take up of spare capacity as the private sector recovers.”