Investment in the East has risen despite a dip in confidence, ICAEW/Grant Thornton study shows

Phillippa Bourne, East of England regional director at the Institute of Chartered Accountants in Eng

Phillippa Bourne, East of England regional director at the Institute of Chartered Accountants in England and Wales. - Credit: Archant

Business confidence in the East of England has declined over the past three months, according to a new survey, partly reversing a strong rebound seen after the General Election.

The latest Business Confidence Monitor report, compiled quarterly by the Institute of Chartered Accountants in England and Wales (ICAEW) and Grant Thornton, includes an index reading for the East of 21.3 for the third quarter of 2015 – down from 27.2 in the second quarter.

Although the latest reading remains well ahead of the 6.5 recorded during the first quarter of the year, it means that confidence in the East has slipped behind the national average which now stands at 22.4, an improvement of 6.2 on the second quarter.

However, a breakdown of the survey shows some grounds of optimism in the region, with businesses in the East reporting that expenditure on capital investment has increased by more than 3% over the past year and expecting a further rise of 3% over the next 12 months. Growth in profit and turnover also remain in positive territory.

Phillippa Bourne, the ICAEW’s regional director, said: “Steady confidence leads to solid foundations for investment growth and it is reassuring to see that investment has been supported by an easing of challenges across the business environment.

“However, changes to the Annual Investment Allowance have been set at a lower level than companies are used to and the Government needs to keep a watchful eye on how the measures announced in the Budget affect businesses in the medium term.”

Paul Naylor, partner and practice leader at Grant Thornton’s Ipswich office, added: “The stabilising confidence of our region’s firms is undoubtedly pegged to the General Election outcome and the clarity this offered, at least in the short term.

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“That said, there are still a number of unknowns facing local businesses including the UK’s future in the EU and the tremor in China’s economy which is having a major ripple effect on global markets.

“In reality there is a significant appetite for British exports across new and established economies which isn’t being utilised. This must be capitalised on if the UK is going to achieve sustainable new growth opportunities.

“What our region’s businesses need now is reassurance and support from Government to maximise export openings and steer through the labyrinth of regulatory and often cultural challenges that firms face in new waters.”

The biggest improvement in sentiment in the latest survey was in Scotland where the index rose by 20.3 from minus 7.4 in the second quarter although the new reading of 12.9 is still the lowest in the country.

Other improvements were recorded in the North West, up 16.1 to 28.3 (the highest of any region in the new survey), the South East, up 11.8 to 26.4, London, up 8.7 to 25, and the East Midlands, up 4.2 to 16.9.

Besides the East, falls were also recorded in Wales, down 5.0 to 22.3, Northern England, down 3.8 to 17, Yorkshire/Humberside, down 3.4 to 19.5, the West Midlands, down 0.9 to 22.8, and the South West, down 0.4 to 19.8.