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UK business confidence
steady despite Brexit fears, finds major ACCA survey
GLOBAL business confidence is at its
highest in 12 months, with OECD countries anticipating a rise in government
spending, a 4 year confidence high in China leading to an uplift in emerging
markets and the US continuing a stable recovery.
With protectionist sentiments on the rise across many nations, the US
presidential elections in November could have a significant impact on whether
this improving confidence translates into genuine increases in employment and
investment.
Faye Chua, head of business insights at ACCA, points out that despite the UK
vote to leave the European Union, business confidence has so far held steady:-
"In the UK, confidence has held up in the wake of gloomy predictions; this
may be partly linked to greater willingness from the incoming administration to
loosen the purse strings (despite a high budget deficit) and rate reductions
from the Bank of England to pre-empt a slowdown.
Yet we must remember that, despite perceptions, the process of Brexit has not
begun yet and that overall the UK represents only 4% of global trade GDP. Nearly
60% of global respondents said that they had not been affected by the vote."
Faye Chua says that the survey highlights the importance of governments
supporting growth and their increasing realisation of the limits of monetary
policy, "Over 51% of global respondents expected government spending to
rise, which has driven global business confidence to the highest point in over a
year. After years of reduced investments in most Western economies, a
combination of falling budget deficits and bond yields is encouraging
governments to reach for their wallets. This is good news for business in a
continued depressed climate for investment and hiring."
Yet Faye Chua says that despite improvements in confidence, the world is yet to
see it translate into a meaningful boost to hiring and investment, "Only
19% of firms said they are considering hiring new staff, and only 14% said they
are looking at opportunities to invest in new technology. In every region, there
were more businesses planning to cut staff than those planning to hire more."
Faye Chua argues there could be bigger challenges ahead for the global economy
in the next quarter, "The World Trade Organisation is reporting record
levels of trade restrictions between nations, and there has been a pronounced
protectionist turn in the US presidential elections with regard to trade.
The outcome and response to that election, together with the prospect of Brexit
negotiations drawing closer, will provide a test of this fragile confidence."
The Global Economic Conditions Survey (GECS), carried out jointly by ACCA (the
Association of Chartered Certified Accountants) and IMA (the Institute of
Management Accountants), is the largest regular economic survey of accountants
around the world, in terms of both the number of respondents and the range of
economic variables it monitors. Its main indices are good predictors of GDP
growth in themed countries and its daily trend deviations correlate well with
the VIX or ‘fear’ index, which measures expected stock price volatility.
Fieldwork for the Q3 2016 GECS took place over 2
September and 19 September 2016, and
it attracted 1,512 responses from ACCA and IMA members around the world, including
more than 150 CFO's. The report can be viewed
online.
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