Business confidence edges upwards
BUSINESS confidence in eastern England is on the rise, according to a study.Lloyds TSB's six monthly Business in Britain survey found firms are hopeful about sales and orders, but profits are still under pressure, while investment in the region is constrained but ahead of the UK average.
BUSINESS confidence in eastern England is on the rise, according to a study.
Lloyds TSB's six monthly Business in Britain survey found firms are hopeful about sales and orders, but profits are still under pressure, while investment in the region is constrained but ahead of the UK average.
The Lloyds TSB Commercial study showed that although the strength and shape of the recovery remains uncertain, businesses in the region are showing signs of rekindled confidence in their prospects for the rest of the year.
However, profits will remain under pressure for some time to come, according to the report, which charts the performance of more than 2,500 UK firms and their views on prospects for the coming year.
It indicates that firms are hopeful of an increase in sales and orders by the end of 2009 but without the ability to raise prices, profits will continue to fall for many. The study also shows that investment and recruitment plans are still being scaled back.
East of England firms are hoping for a boost in sales and orders by the end of the year, it found. Its business confidence index1, which tracks firms' expectations for sales orders and profits over the coming six months, has risen to a balance of -1%, from a record low of -24% six months ago.
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Almost a third (29%) of firms in the region are now expecting an upturn in sales, with the same proportion braced for a fall. This compares to a balance of -22 in the survey six months ago.
The overall balance of the region's firms expecting an increase in the next six months has risen to +10%, ahead of a UK average of +6%.
But although the balance of firms in the east expecting rising profits has improved, it is still firmly in negative territory at -13%. A quarter (24%) expect profits to climb, while over a third (37%) believe they will tumble. A third (35%) think profits will remain stable.
A quarter (26%) of companies in the region reported cash-flow problems, with late payments by customers and weak demand remaining the main causes. A balance of -20% of firms in the East of England intend to increase capital expenditure in the next six months.
There is some improvement in the number of firms expecting to increase staff levels. One in ten firms (10%) plans to recruit during the last six months of 2009, while just under a fifth (18%) plan to reduce numbers, a balance of -8%. Although this is a clear improvement on the balance of -19% in the last survey, it is still a negative balance, meaning that firms are continuing to reduce numbers, albeit at a slower pace.
With consumer and business demand still in the doldrums, just 15% of firms expect to raise prices over the next six months, while 14% are contemplating cuts - a balance of 1%. Most firms (66%) say they will keep prices on hold.
A balance of 15% of firms in the region expect overseas orders to increase over the next six months, with 35% saying exports will rise. 20% believe they will fall and 41% don't envisage a change.
Business confidence improved in all sectors, with business and other services, wholesale distribution and manufacturing reporting confidence levels above the all-sector average.
Neil Mahoney, regional director Lloyds TSB Commercial, said: “A major factor in the dramatic fall into recession has been plummeting business confidence - and restored confidence is the key to any recovery. So this evidence that firms in the East of England are regaining faith in their business prospects is good news.
“But the survey indicates a levelling off in the downturn, rather than a return to strong growth. For the time being, profits will remain under pressure and investment will be on the backburner, and that means businesses will need support in order to ensure the momentum of any recovery.
“The somewhat more positive outlook, with growth projected in export markets, means that there are opportunities - and we hope that strong firms from across the region can seize the initiative.”