UK business optimism rises heading into the new year

Businesses across the globe are ever so slightly more optimistic about their country’s economic outlook going into the new year, research by Grant Thornton highlights. Particularly India and Ireland remain optimistic. Concern about China’s economy has been tempered slightly, boosting the outlook of businesses in neighbouring countries. The UK is Europe’s second most optimistic country, following from strong export, talent and investment figures.

Grant Thornton recently released its International Business Report (IBR) for Q4 2015. As part of the report, the consulting firm explores the business confidence expressed by businesses in 36 countries across the globe. The research shows that global optimism about the world economy has remained relatively flat over the year 2015. Just over a third (35%) of businesses was optimistic about the world economy over the coming 12 months in Q4 2014, which has increased slightly to 36% in Q4 2015.

When comparing regions, it shows that the US has seen a significant decrease in confidence, falling from 74% in Q3 to 50% in Q4. Latin America on the other hand has seen business optimism across the whole increase slightly, up from 11% to 18% in Q4. Argentina, putting its financial troubles behind it, has seen its optimism rocket to 68% – the highest since 2011.

According to the firm’s research, many of the world’s regions are going into 2016 with an air of optimism. The fear of China’s slowdown impacting local players has been tempered, while the country itself is more optimistic about its outlook – increasing from 26% to 36% in Q4. Indonesian businesses are considerably more optimistic (36% to 56%), while Malaysia (-28% to -14%) and Thailand (-8% to 4%), which have taken bigger hits to confidence, have eased. The APAC countries businesses have shown considerable improvement to their economic expectations, up from 20% to 31% in Q4. India is the region’s most optimistic country, at 89% of those surveyed.

European confidence
For the first time since the financial crisis stable reigns across Europe, where, on average, 38% of businesses surveyed are optimistic about their economy over the next 12 months. This is a consistent number compared to Q3 and Q1 of 2015.

“The resilience in the EU business community is remarkable when you consider the potential social and political flashpoints. The migrant crisis is yet to be resolved, and the threat of terrorism remains very real, while one of its leading members could vote to leave this year,” comments Ed Nusbaum, Global CEO at Grant Thornton. “Yet businesses are shrugging that off and thinking longer-term. Investment in R&D is set to rise and while challenges remain, economies like the UK, Ireland and Spain exemplify the broad based optimism across the continent.”

UK economy
The UK businesses assessment of the economy is the second most positive in Europe, coming in at 73%; only Ireland does better at 88%. The UK has been trending upwards recently, with optimism up 6% since Q3. The optimism is buoyed by a number of factors, including export prospects increasing 11% to 23%, while profitability expectations rose 22% to 63%. The need to innovate has trickled down to UK businesses, with an 8% jump in R&D budgets up to 25%. There are also fewer businesses concerned about the availability of talent. One fifth (21%) sees this as a constraint compared to 31% in Q3, and those expecting to increase employment are up by 8% to 40%. The country’s businesses are also the least concerned about global economic uncertainty in the coming year.

Robert Hannah, Chief Operating Officer at Grant Thornton UK, comments: “In many ways, the UK’s optimism is testament to the newfound resilience of our economy in light of the myriad challenges it's faced over recent years. Whilst major socio-economic issues such as the migrant crisis, questions over our relationship with the EU and matters of national and international security remain unresolved, UK businesses are successfully calibrating to the volatile, uncertain, complex and ambiguous (‘VUCA’) global business environment.”