UK business confidence lowest since Great Recession

A new study has found business confidence in the UK to be its lowest since 2009. As firms look to weather the storm, however, employers have favoured reductions in research and development spending, rather than the layoffs traditionally favoured in a recession.

Accenture and S&P Global have polled 12,000 businesses across Europe, including 1,400 in the UK, to weigh up the expectations of firms for the immediate future. With inflation still soaring, the global economy entering a recession, and geo-political tensions still high around the world, companies are understandably cautious.

In the case of UK businesses, confidence continued to fall. Having been evaluated as being a net positive of +56% in February, and +28% in June, the consultants’ report found that it plummeted a further by -10%, to +18%. While that is still technically a positive, it represents the lowest level of UK business confidence in at least 13 years – since the Great Recession, which lasted from 2007 to 2009.

Commenting on the findings, Simon Eaves, Market Unit Lead for Accenture in the UK & Ireland, said, "As we head towards what is likely to be a tough winter for the UK economy, business confidence has understandably been shaken.”

However, Accenture’s analysts also believe the survey shows a confidence that the UK economy, at least, may bounce back quickly from its recession. In particular, Eaves pointed toward the fact many British companies are continuing to demonstrate resilience in the face of economic difficulties, via their human resource strategies.

He added, “Hiring plans remain positive and overall optimism... During these challenging times, businesses should stay focused on the long-term and plan for the next growth cycle to remain competitive. They can do this by seeking to reinvent their operations across the whole enterprise, invest in new technologies and skills, and embed sustainability in everything they do."

Indeed, firms place such importance on hanging on to key labour, to come out ahead in the economic recovery, that 80% expect to raise salaries over the next 12 months. Usually companies looking to weather an economic storm freeze pay, or even prepare for layoffs. But as staff contend with the cost of living crisis, the majority of employers are looking to make sure they do not lose trusted employees to competitors, by keeping wages in line with inflation.

Instead, many companies are looking to save money elsewhere. Capex and R&D forecasts were the lowest seen since 2020 – when companies similarly braced for bad news in the early days of the Covid-19 pandemic. Capex confidence saw a net balance of -7%, while R&D was -8%.

Sentiment among businesses on hiring is more divided, however. While confidence on recruitment is still positive – and firms believe that the skills they need over the next 12 months remain broadly unchanged from 2021 – only half of firms surveyed were confident about recruiting entry-level staff. At the same time, only 29% expected to find experienced candidates. In terms of the areas businesses were most likely to prioritise hiring employees, operations led on 28%, ahead of sales and marketing at 18%, and digital skills on 15%.