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Weak business confidence in the South East continues

Survey suggests Brexit uncertainty is affecting capital investment in the region

Weak business confidence in the South East continues

Business confidence in the South East has weakened in each of the last three quarters and now stands at -12.3 in Q1 2019, according to the latest ICAEW Business Confidence Monitor (BCM).

Brexit uncertainty is likely to be weighing heavily on a range of sectors in the region, including exporters such as pharmaceuticals and engineering.

ICAEW South East director Harpreet Panesar said: “Companies in the region at the moment are unclear about the future.

“Directors have the exceptionally difficult task of explaining within their annual reports the impact Brexit might have on their business models and operations.

“As the roulette wheel continues to spin, UK plc is having to place its bets based on best guesswork – and the stakes could not be higher.

“Companies are making decisions now about jobs, supply chains, headquarters and asset locations – incurring significant, and possibly unnecessary, cost and upheaval.

“We fear the destructive effects of a no-deal outcome on the economy so urge our politicians to work together to break the Brexit deadlock and help restore business confidence.”

Aside from Brexit, there are other challenges for companies in the South East, particularly the labour market.

Over the past year there has been an upward trend in the proportion of companies reporting concern over the availability of management as well as non-management skills, reaching 19% and 26% of businesses respectively.

The tightness of the South East labour market is a possible explanation for worries over skill shortages, with the region’s unemployment rate (3.2%) among the lowest in the UK.

Despite these factors weakening confidence, companies are currently achieving strong sales growth.

Domestic sales (3.9%) and exports (4.5%) are rising at faster rates than a year ago and are both outperforming their respective national averages.

The situation looks set to continue in the year ahead, with companies expecting to achieve similar rates of growth to those of the last 12 months.

They foresee domestic sales and exports increasing by four per cent and 4.2% respectively, and profit rising by 3.8%.

However, planned investment growth is set to remain muted, with further Brexit uncertainty likely to be a significant factor.

Businesses plan to increase capital investment by just 1.4%, a slower rate than reported in the past year.

If such subdued rates persist beyond that, then that could have significant long-term implications for the South East economy.

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