While business optimism in the Eurozone has almost tripled in the first quarter of 2015, UK businesses are feeling less confident, research by Grant Thornton shows. Compared to the rest of the world, the UK is still amongst the most confident economies, with especially Eastern Europe and Latin America seeing decreased levels of optimism. According to the firm, this presents both concerns and opportunities for UK businesses.
The most recent edition of Grant Thornton’s International Business Report (IBR), for which it surveyed more than 5,400 business leaders in 35 economies, shows a jump in business optimism in the Eurozone in the first quarter (Q1) of 2015, with confidence moving back up towards pre-crisis levels. The research, however, also shows that the UK is lagging behind as the country saw its business’ optimism fall slightly in Q1.
In the Eurozone, optimism almost tripled from 13% in Q4 2014 to 38% in Q1 2015. The economies hardest hit by the financial crisis, such as Spain (52%) and Italy (32%), experienced the strongest improvements. Ireland*, also one of the hardest hit countries, tops the global list of business’ optimism with 92% of its businesses confident. The European country with the least optimism is French which saw a net percentage of businesses optimistic in the economic outlook of -15, although this percentage is up from -36 in Q4 2014.
The research shows that although most business leaders feel more confident this year than in 2014, leaders in the UK are amongst the ones that feel less optimistic, as their optimism dropped to 65% in Q1 2015 from 68% in Q4 of 2014 and 83% during the same period last year (Q4 2014). Main concerns, as listed by the UK businesses surveyed, include lack of skilled workers (31%), economic uncertainty (28%) and regulation and red tape (23%).
Commenting on the results, Scott Barnes, CEO of Grant Thornton UK, says: “Businesses trade on certainty, so the uncertainty created by the highly unpredictable General Election, coupled with continued dialogue on Britain’s future in the EU is starting to unnerve some business leaders. In order for their growth expectations to translate into more tangible realities, businesses need to invest in the skills and resources for growth – a difficult thing to do when so many ‘known unknowns’ still linger.”
When comparing UK with other countries globally, the UK is still among the top countries and is found on a shared sixth place with Australia, behind Indonesia (68%), the Netherlands (78%), the Philippines (86%), India (89%) and Ireland. Latin America (5%) and Eastern Europe (6%) have seen sharp downturns in optimism, with Argentina at the bottom of the list at -38% and Brazil at -18%.
According to Barnes, these decreased confidence levels will also impact optimism levels in the UK. “The once-mighty BRIC nations seem to no longer be moving in lockstep, as the Chinese and Indian economies gather steam, the Russian and Brazilian markets seem to be abating. This offers the obvious concerns for UK businesses exporting to these markets; but also a significant opportunity for UK businesses to look beyond the traditional emerging economies to other high-growth developing nations where ‘Brand Britain’ carries a premium.”
* The 2014 Pulse CEO Survey by PwC Ireland found similar figures when it reported that 86% of Irish CEOs have confidence in a positive future outcome for the Irish economy.