North East business confidence well above the rest of the UK as inflation concerns fall

Businesses across the North East have maintained their confidence despite overall business optimism in the UK falling to its lowest in 2023, according to the latest Accenture / S&P Global UK Business Outlook.

The net balance of firms in the North East expecting activity to increase over the next 12 months stayed at +54 per cent from June 2023. This is 17 points higher than the rest of the UK which dipped to +37 per cent, down from +40 per cent in June and +43 per cent in February.

Business optimism in the region also remains above both the European (+16 per cent) and global (+25 per cent) averages, which fell by 8 per cent and 3 per cent respectively. Inflation expectations for non-staff costs in the North East continue to soften. At +30 per cent, they are at their lowest in the region since the survey began in February 2022, down from +46 per cent in June 2023 and their peak of +70 per cent in June 2022.

Alongside the positive outlook from businesses across the North East, +44 per cent are expecting a net gain in profits, which is more than double the UK average of +17 per cent.

Across the North East, +40 per cent of businesses offer a positive prediction for employment over the next 12 months, which is the highest it has been in the region since the survey began in February 2022.

While expectations for an increase in salary costs remained high across the UK at +73 per cent, concerns were lower in the North East following a five point decrease to +50 per cent. However, efforts to increase employment and address current skill gaps could see high wage inflation continue.

Forecasted growth in spending in research and development also fell 19 points to +7 per cent but remained higher than the rest of the UK, which expected a decline in R&D spending for the upcoming year (-4 per cent).

Allan King, Head of North East Operations at Accenture said: “It’s encouraging to see businesses in the North East maintaining their positive outlook, with business confidence remaining at its highest since we started the survey in February 2022.”

The net balance of firms expecting activity to increase over the next 12 months slid to +37 per cent in October, down from +40 per cent in June and +43 per cent in February.

Although UK companies maintain a positive outlook for the upcoming year, the research suggests that concerns about the cost of living and elevated interest rates have tempered the positive effects of milder inflation. UK business optimism still remained relatively high compared to global (+25 per cent) and European (+10 per cent) average, which fell by 3% and 9% respectively.

Ewan Mackay, strategy and consulting lead at Accenture in the UK & Ireland, said: “UK business respondents are more optimistic than firms in Europe and around the world. However, it’s no surprise that corporate confidence has wavered in the face of ongoing change, with wider economic challenges impacting interest rates and high prices putting a dent in consumer spending.”

“While projections for the next 12 months remain positive, it’s important that businesses take action now to turn expectations into reality even if the economic picture remains uncertain. Now is the time to stay the course with strategic investments where possible, hiring the best skills and embedding the right technologies throughout the core of their business to position them for future growth.”

By Mark Adair – Correspondent, Bdaily

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