Business Confidence For Yorkshire & Humber Has Fallen For The Fourth Successive Quarter

Business confidence across Yorkshire & Humber has fallen for the fourth successive quarter in which the region’s index score has been below zero according to the The Institute of Chartered Accountants in England and Wales.

Despite businesses reporting stable sales rises, slower cost increases and faster profits growth, companies are facing several challenges, particularly in recruiting and getting the right skills.

ICAEW Yorkshire & Humber Director, James Callaghan,said:


"Although some financial indicators are stable, companies in the region are facing lots of business challenges. Regulatory requirements are more of an issue as well as the availability of non-management skills compared to a year ago”

Exports and domestic sales

Although business confidence is weaker, sales growth within the region is fairly stable, with domestic sales (3.4% year-on-year) and exports (3.2%) expanding at broadly similar rates to a year ago. Such growth rates are also comparable with national rates in Q2 2019.

Businesses also report faster profits growth this quarter, reflecting rises in sales combined with stable wage growth (unchanged from last year at 2.2%) and an easing of input price inflation, from 3.0% a year ago to 2.3% in the year to Q2 2019.

Business challenges

Despite these positive developments, companies are facing a number of challenges. Regulatory requirements remain the most widespread issue, with 47% of businesses in the region reporting growing concern over these.

There are also pressing labour market worries with 27% of companies becoming increasingly challenged by the availability of non-management skills, up from 18% a year ago.

Investment

While overall confidence is down, investment growth among businesses is healthy. Research & Development (R&D) budgets are rising by 3.5%, compared to just 1.8% in the year to Q2 2018 and capital investment growth is marginally faster than last year, at 2.6%.

However, in the year ahead, businesses project only limited increases in spending, with growth across all forms of investment forecast to slow.

Prospects for the next 12 months

Businesses expect the pace of exports and profits growth to ease, to 2.9% and 3.8% respectively. And little change is forecast for domestic sales, which are set to rise by 3.3% in the year to Q2 2020.

This underscores the weakness in overall confidence that characterises businesses in Yorkshire & Humber.