Confidence amongst UK SMEs has markedly declined for the second consecutive quarter and has now fallen to the lowest recorded level in the survey’s history, following a previous low in Q3 2022, according to a leading accountancy body.
This is according to the latest Global Economic Conditions Survey (GECS) research from ACCA (the Association of Chartered Certified Accountants) and IMA® (Institute of Management Accountants).
The fall in confidence comes following the announcement of large tax rises for UK employers in the recent Autumn Budget. This will make sobering reading for the government and points to increased risks of stagflation in the UK economy.
The one positive result was a small rise in the New Orders Index, although it remains below its average. It was clear from the research feedback that the recent Budget, particularly the rise in National Insurance contributions for employers, has had a very significant negative impact on the sentiment of firms. This is at a time when businesses are already navigating a very uncertain global economic backdrop.
Glenn Collins, Head of Technical and Strategic Engagement, ACCA UK, said: ‘This winter, the government is enduring a storm, partly of their own making. There was no festive cheer in this quarter’s UK data from our GECS report. The government needs to shift its, and the country’s, focus to make it easy to do business and encourage growth. Tight fiscal constraints make this a tight-rope to balance, but the spending review must focus on restoring some much-needed positivity. ‘
On a global scale, the UK appeared to be something of an outlier, although there was still a marked decline in overall confidence as a general trend. Businesses around the world are facing a highly uncertain year ahead, amid a new U.S. administration, heightened geopolitical tensions, and various domestic economic and political challenges.
Jonathan Ashworth, Chief Economist, ACCA, said: ‘The global economy proved quite resilient in 2024, aided by the strength of the U.S. economy. The greater resilience of the Global New Orders and Capital Expenditure indices would suggest that the global economy is not set to lurch downwards imminently. Nevertheless, while the Global Confidence Index can at times be volatile, its sharp decline attests to the significant nervousness among companies, given the enormous uncertainty at the current juncture. Against such a backdrop, there are significant downside risks to global growth over the coming year’.
Alain Mulder, Senior Director Europe Operations & Global Special Projects at IMA said: ‘Confidence in the U.S. registered a reasonable gain after a large increase previously and is now slightly above its historical average. There were also improvements in the other key indicators by varying degrees. This is clearly an encouraging sign, because the U.S. is the only major engine of the global economy where activity is showing significant resilience at the present time.’
Accountants also identified their top three risk priorities at the end of 2024 in the survey. For the UK, these were ranked as:
- Economic inflation / recession
- Talent scarcity / skills gap / employee retention
- Technology / data / cybersecurity
Collins added: “After years of stunted growth, domestic, global, price and commodity uncertainty, UK businesses are finding it tough.”
Read the report here
Visit ACCA’s website for more information.
