Confidence of UK and Irish SME leaders dips before Brexit

12 February 2019 Consultancy.uk

A new report on the confidence of small and mid-sized enterprise leaders in Britain and Ireland has found that business leaders harbour serious reservations about the performance of the nations’ economies in the coming year. More than nine in 10 meanwhile suggested that economic conditions have worsened in the last 12 months.

Vistage is a CEO peer advisory organisation, aimed at working with CEOs and executive leaders who are looking to drive better decisions and better results for their companies. Vistage has over 22,000 members spread across 20 countries worldwide, who gather in confidential peer advisory groups to tackle their toughest challenges and biggest opportunities.

According to a new survey from the consultancy, which polled 279 UK and Irish leaders of small and medium sized organisations, the confidence of UK SME business leaders has dropped to its lowest point since June 2017, when the advisory firm started tracking data. This decrease in confidence is largely driven by a further significant decrease in expected economic conditions, as well as a decrease in confidence toward current economic conditions.

How do you expect the following to change in the coming year?

The effect of Brexit negotiations – which continue under a cloud of uncertainty in the face of cabinet and parliamentary negotiations – have more than made their mark on the business community. As a result, CFOs face a gruelling few months, as many attempt to formulate an antidote to Brexit uncertainty before the UK formally secedes from the EU. According to a recent survey by Deloitte, as a result of this uncertainty, CFO confidence languishes at a net score of -30%. This represents a low point since the UK’s EU membership referendum result in 2016, when confidence plummeted to -70%.

With the impending culmination of Brexit’s two-year negotiation window fast approaching, while a concrete agreement to prevent a hard Northern Irish border remains elusive, 93% of respondents to Vistage’s questionnaire believed current economic conditions have remained the same or worsened over the past 12 months. At the same time, a majority of 66% of business leaders expect conditions to further worsen in the coming year.

Roger Martin-Fagg an economist affiliated with Vistage, said of the results, “The global slowdown, combined with Brexit and the rise of European populism is a combination of risks which will continue to depress confidence and growth.”

Individually confident

British and Irish business leaders also noted a major shift in confidence relating to sales revenues. A continued high street crunch in the UK exemplifies this, with the floundering value of the pound and stagnating wages meaning consumers are less inclined to part with what little money they have left, when their essential spending is taken care of. This trend expands beyond the retail sector though, and has even impacted the consulting industry, with revenue growth slowing as clients brace for a period of economic turbulence. 42% of respondents told Vistage they expected this to either decrease or remain the same in the next 12 months.

Interestingly, however, while business leaders are gloomy about the prospects of the general economy, they do not seem to believe that the poor business environment will expand to their own firm. The majority of business leaders believe that their firm's profitability will increase in the coming year. At the same time, despite difficult conditions, many business leaders are forecasting in 2019 that their plans for talent acquisition and new hires will remain largely unchanged – as they remain confident in their abilities to weather any potential fall-out from ongoing uncertainty. 

Further commenting on this, Roger Martin-Fagg warned, “Our latest findings reflect the impact that political risk has on economic activity. I would not expect any improvement in confidence until the UK Government produces evidence that it has a clear set of deliverable objectives.”

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