At the end of December, the Institute of Directors reported that business leaders’ confidence in the British economy sunk to its lowest point in over 18 months. The survey, informed by over 700 company directors, reported a negative score that surpasses the level following the inconclusive results of the 2017 general election. Lack of economic confidence varied depending on the size of the business involved, with the largest firms reporting an especially pessimistic outlook.
The IoD’s Confidence Tracker had briefly reached positive figures earlier in the year, thanks to the agreement of a Brexit transition period. However, it has since consistently fallen. With less than three months until Britain leaves the European Union, the future outlook looks worryingly unclear.
The Brexit Effect on Business
With Brexit set to play a pivotal role in all areas of Britain’s long-term future, the recent uncertainty is allowing economic problems to persist and, in some cases, worsen. Different business metrics have followed a similar pattern over the last twelve months, and in November many studies showed a slight increase in business optimism following the acceptance of a withdrawal agreement.
The UK government has tried to encourage businesses throughout this process. Theresa May increased business engagement prior to Brexit, whilst the Chancellor’s 2018 Budget – much dependent on the outcome of Britain’s withdrawal – also included measures to promote growth. Businesses persistently asked for detail regarding the future trading agreements with the UK’s largest partner, so when that was received in the form of the withdrawal agreement, positivity spiked.
However, since it was agreed in November the deal has come under increased political pressure. Despite many business groups quietly backing the agreement and its increased future clarity, it looks unlikely to pass in a divisive governmental landscape. This has led to more confusion now than there was before November, evidenced by the latest drop in the Institute of Directors’ survey. The growing lack of confidence is made worse by the increasing public and political acceptance of no deal as a viable option, something that is widely agreed to be catastrophic for business. The increased risk that no-deal brings has played a key role in recent growth deteriorations, both for businesses and the wider British economy.
A Distracted Government
However, Brexit is just one of many problems currently being faced by UK businesses. In a statement, the IoD says that “leaving the EU has consumed the political agenda,” with not enough time given to other domestic issues. In their survey, they report that whilst Brexit and the broader economy are the major concerns, nearly 40% of directors surveyed see skilled labour shortages as a top business concern. Countless industry sectors, from manufacturing and building to healthcare and hospitality, have all reported problems with staffing, both in terms of quality and quantity. A combination of lack of employment, rising costs and reductions in overseas workers has created challenging employment conditions for many UK businesses.
Concerns with UK productivity were another constant for much of 2018, whilst government regulation and taxes continue to leave certain companies uncertain. With so much national focus on future trading agreements, these domestic issues have been allowed to swell, and it is not clear how or when the British government will consider and resolve them. This combination of domestic and economic concerns is creating an uncomfortable business landscape that is threatening the future profitability of many UK companies.
With this in mind, many corporations are now looking at streamlining all aspects of their operations to help sustain long-term performance. This can be achieved with the help of procurement consulting firms like ERA. Trading in the UK since 1992, we are experts at refining procurement strategies for major British businesses. Our experts work in a range of specific cost sectors and have helped companies to save millions in areas such as utilities, distribution and packaging. With Brexit on the horizon, now is the perfect time for companies to evaluate their supply chains, so why not speak to us today and see what savings we could create for you?