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The latest Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants) released last week shows economic confidence rebounding in the first quarter of 2017, an improvement driven by the US where investors are hopeful that a combination of fiscal reform, increased investment in infrastructure and deregulation will provide a boost to economic growth.

The report is the largest regular economic survey of accountants around the world, and noted business conference at its highest level since the second quarter of 2015. Though driven by the US, the improvement in confidence was widespread, with most countries and regions, including Western Europe, Asia Pacific, and Central and Eastern Europe showing improvements.

The survey of finance professionals and business leaders worldwide noted that Q1 2017 displayed the fastest rate of growth in global trade since 2015. The survey found that the biggest concern for companies over the past three months was increased costs (a problem for 46% of respondents), consistent with rising headline inflation rates in many parts of the developed and developing worlds. Despite this there are significant improvements for employment and investment, with 22% of firms planning to create more jobs and raise capital expenditure (up from 16% and 14% respectively in Q4 2016).

"The rise in confidence, combined with strong economic hard data, offers genuinely encouraging signs for the global economy: with an increasingly optimistic mood in the US and a stimulus-led recovery in China driving prospects for world trade," said Faye Chua, head of business insights at ACCA. "This strong start to the year has taken place against a backdrop of potential threats facing the world economy at the start of 2017."

Added Raef Lawson, executive vice president at IMA: "The US economy has maintained an elevated level of confidence from Q4 in 2016, with 37% of firms feeling more confident, although there was no uplift from the previous quarter. An expectation of increased infrastructural spending and tax cuts has contributed to a buoyant business mood even though they are yet to materialise into policy."

However, Mr. Lawson continued: "Inflation and currency fluctuations, however, are a cause for concern. 43% of US firms are troubled by rising costs, and 22% by exchange rate movements. Despite the Fed's interest rate hikes, borrowing costs in the developing world remain low, and the dollar is likely to continue growing in value. That could pose a challenge to US firms' competitiveness, and the White House's determination to reduce the trade deficit."

The survey found that in the United States, confidence remained flat but elevated; in Q1 2017, 37% of respondents were more confident about the future, compared with 24% who were less confident. This buoyant overall level of confidence comes on the back of a surging stock market, which has risen to record highs on the back of confidence that a fiscal stimulus and wave of deregulation will provide a boost to economic growth.

US respondents reported confidence that a big increase in government spending is on the way. Other components of the GECS – government spending, capital spending, and employment – also rose in the first quarter. The main concern for US companies is rising costs—cited by 43% of respondents—which is consistent with a recent, sharp rise in inflation and wages as the US economy moves closer to full capacity.

The negative impact of exchange-rate movements (cited by 22% of respondents) was another concern. US interest rates are set to rise this year, but borrowing costs in the rest of the developed world are likely to remain very low, so, the survey noted, it's possible that the US dollar will appreciate in the coming months; this will erode the competitiveness of US-based companies.

GECS is the largest regular economic survey of accountants around the world. Fieldwork for the Q1 2017 GECS took place between February 24 and March 13, 2017 and attracted 1,334 responses from ACCA and IMA members around the world, including more than 150 CFOs.

(Source: ACCA)

Small business owners are feeling good about sales, the economy and future conditions, with women- and millennial-owned businesses reporting significant increases in sentiment and expectations for the future. Capital One's latest Small Business Growth Index found 50% of small business owners (SBOs) overall feel current business conditions are good or excellent (up from 41% a year ago), and the same percentage expect to see conditions improve in the next six months – the highest level reported since spring 2012.

"It's encouraging to see more small businesses feeling optimistic about their performance and future prospects, particularly women and younger business owners who represent increasingly significant segments impacting our local and national economies," said Buck Stinson, head of small business card at Capital One. "At Spark Business, we're committed to understanding the opportunities and challenges impacting small businesses across the board, so we can build solutions that enable growth and success."

Meanwhile, despite the increased optimism, the survey showed many businesses appear hesitant to invest in people, technology and marketing that may fuel business growth, with a majority of SBOs reporting they have no plans to hire (67%), increase marketing (66%), or invest in new technologies such as mobile payments (62%) in the coming six to twelve months.

Following are key themes revealed by the Spring 2017 Small Business Growth Index. Additional data and insights, including historical, demographic and regional comparisons, can be found here.

Business owners are feeling good and expect conditions to continue improving in 2017.

Despite the optimism, most SBOs are still hesitant to invest in the near-term.

Businesses that use data analytics and mobile payments are more likely to have increased sales.

(Source: Spark Business)

Small businesses are facing the most uncertain economic time in recent history, yet the Make or Break Report 2017 from Xero examining the opinions and character traits of successful small business owners going into 2017 has revealed irrepressible optimism as a common trait.

Small business confidence was still found to be high, particularly with very young businesses, despite economic uncertainty being the most pressing concern for UK and US business owners. The vast majority of 1 year old (94%) and 2 year-old businesses (84%) said they felt more confident going into 2017 than the previous year, and over three quarters (79%) of small businesses said they felt confident about their business’ survival in 2017. For those going through a tougher time, nearly a fifth said they expected 2017 to be a turnaround year for their business. So why is it that small businesses are feeling so confident?

They want to cut themselves free of the red tape

They are shunning traditional office structures to increase productivity

They are prioritising the health and happiness of themselves and their employees

They see themselves as in control of their own destiny

Keeping grounded

While confidence and optimism from small businesses was found to be the underlying trait of small business owners, the report revealed areas for improvement and viewpoints to consider.

Gary Turner, UK co-founder and managing director at Xero, said: “Our report has revealed a remarkable trait among small businesses to look on the bright side, particularly in the current climate when faced with so much uncertainty. Given the importance of small business health on our economy here in the UK, it is fantastic to see that small business owners are feeling so confident about the future. But, as cash flow and healthy finances have never been so vital, owners must keep a sense of realism and listen to external advice and support to ensure that business continues to grow and prosper through the next few years.”

Josephine Fairley, Green & Black’s co-founder and serial entrepreneur said: “Owning a business is invariably a rollercoaster full of ups and downs and you must learn ways of thinking your way out of difficult situations, so it’s brilliant to see such optimism coming through as a defining quality in an entrepreneur from Xero’s report. Having a concrete plan for your business combined with a can-do attitude can help you to win regardless of what you are faced with.

“While optimism is important, consulting with experts and keeping on top of your data can enable you to make the right decisions for your business that will help you not only survive, but thrive.”

 

(Source: Xero)

Following years of sluggish economic recovery, business leaders believe 2017 stands to usher in a long-awaited acceleration in growth. According to ‘America's economic engine - Breaking the cycle’, Deloitte's 2017 report on business and economic trends in the privately-held and middle-market segment, 83% of executives surveyed after the November election are confident that the US economy will improve over the next two years (compared to 65% last year). In fact, 39% of respondents expect the US economy to grow in excess of 3.5% over the next 12 months.

The executives surveyed are equally optimistic about their company's success and performance in the year ahead, particularly across key business metrics such as employment, productivity, profits and capital investment. 78% of respondents expect revenue growth in excess of 5%.

"Our postelection survey paints a positive picture for breakout growth in 2017, pointing to a strengthening economy and potential improvement in business conditions year-over-year," says Roger Nanney, vice chairman, Deloitte LLP, and national managing partner of Deloitte Growth Enterprise Services.

In addition, the survey revealed that two-thirds of respondents believe the US election results will boost the US economy; another 63% believe the new administration will have a positive impact on their company's operations.

Optimism tempered by heavy dose of uncertainty
While postelection promises have buoyed confidence in the economy and in company growth among private company and middle market executives, the results also show increased uncertainty: 70% feel more uncertain than they did a year ago about the main factors driving their future business prospects.

"Certain economic and geopolitical issues are among the obstacles these executives cite in the survey," says Bob Rosone, managing director, Deloitte Growth Enterprise Services, Deloitte LLP. "However, the respondents appear hopeful that these challenges might be addressed with policy changes by the new administration."

According to the survey, business leaders see increased regulatory compliance (33%), keeping up with the pace of technology (33%), and rising health care costs (32%) as the top three obstacles to their company's growth. Executives also emphasized skills shortages as a growing concern, increasing by 10 percentage points from last year as a roadblock to economic and business growth.

When asked which government measures would help their businesses grow the most over the next 12 months, the No. 1 response cited was reducing corporate tax rates; keeping interest rates low, rolling back health care costs, and supporting infrastructure needs were all tied for the next most important measure.

Technology and talent continue to drive mid-market investments
Technology yet again tops the list as the key investment priority for surveyed companies over the next 12 months. Business leaders are particularly looking to focus their technology investments on cloud computing (42%), data analytics (40%), and customer relationship management (34%). They indicated the greatest potential returns from technology investments like these may be business process improvement, employee productivity and customer engagement.

Employee development and training also continue to be a key investment, as 72% of survey respondents indicated they have difficulty finding new employees with the right skills and education. For this reason, training (47%), increasing full-time employees (44%), and increasing compensation (33%) were cited as the top investments in talent over the next 12 months.

Mid-market companies tap M&A and IPO to remain in growth mode
According to the survey, private and mid-market companies are also looking to mergers and acquisitions (M&A) and initial public offerings (IPOs) to reach their business goals. While global M&A and IPO activity slowed sharply in 2016, more companies from the survey expect to pursue deals and go public in 2017.

More than half (53%) of the companies surveyed say they will likely pursue M&A as an acquirer, up from 39% a year ago. Furthermore, 45% of companies say they will likely be an M&A target, up from just 21% last year. Two of the main factors that respondents believe will drive M&A activity in their company over the next 12 months are increased availability of capital and renewed confidence in the economy.

As for pursuing an IPO, 28% of companies reported that they would likely go public in the next 12 months, nearly doubling the number of companies from last year (15%). Reasons cited include broadening the exposure of the company's brand and products, the cost-effectiveness of equity capital, and the need for additional capital to fuel growth.

Companies look to global markets to help address challenges
The survey reiterated the importance of the global economy as US mid-market companies are increasingly looking overseas to expand their operations, boost their productivity, and develop new products and services.

More than half of the companies surveyed expect to increase their revenues generated outside of the US, with 29% predicting revenue increases between 26 and 40% over the next 12 months. Canada, Western Europe, and Asia Pacific are expected to be the top three contributing markets. Additionally, nearly 60% of mid-market companies expect to have 11% or more of their workforce outside the US, compared to 42% currently. This will be an important trend to follow as the skills gap consistently emerges as a growing concern.

"As mid-market companies plan for overseas expansion and closing the skills gap, new policies and regulations around trade could have a significant impact on economic activities abroad," concluded Nanney. "The good news is that companies in this segment are confident and looking for opportunities to improve their businesses in an ever-changing landscape.”

(Source: Deloitte)

SimCorp recently announced the results of a comprehensive survey, titled 'Realizing Growth Through Operational Agility', which examines the current state of IT and operations in the global buy-side investment management industry and includes several notable findings. This includes the fact that 47% of the surveyed firms lack confidence in either their IT infrastructure, their data, or both.

The results also show that firms that are confident in both their data and infrastructure are much more likely to pursue a growth strategy than those with data/infrastructure problems. Further, firms with a lower degree of confidence in data or infrastructure are more likely to increase IT spend in the future, according to the survey.

The availability of real-time data in the front office is generally perceived as an important factor in buy-side firms' ability to make quality investment decisions. The survey shows that almost half (47%) of the respondents do not have access to real-time data in the front office. When breaking this down by IT strategy, the findings show that more firms running on 'an integrated investment management solution' have access to real-time front office data than those running with 'a core platform with multiple add-ons' or a 'best-of-breed strategy'.

Other findings include:

David Beveridge, Senior Product Marketing Manager at SimCorp commented: "Having roughly half of all surveyed firms express a mistrust in either their IT infrastructure or data is alarming. While this is damaging to the firms' own ability to generate growth, the ultimate losers could very well be their clients. The survey results clearly suggest the integrated solution strategy as the most viable path to higher operational agility and efficiency."

The survey was conducted in mid-2016 by the market research firm Lindberg International and covered 150+ respondents worldwide. For a full presentation of survey results and conclusions, please download the white paper: 'Realizing Growth Through Operational Agility'.

(Source: SimCorp)

National Write Your Congressman (NWYC) has found small business owners voicing high levels of optimism for the incoming administration's plans for the US economy and their own business prospects in its Q4 2016 Index. NWYC, an organization that gives small businesses a voice in American government, issued its Quarterly Index measuring small business owners and operators' sentiment towards Congress and their confidence in the US government.

The Q4 2016 Index found its membership of small business owners expect the most direct and positive impact on their 2017 business results from five specific components of President Trump's first 100 days agenda: tax reduction, health care reform, regulation relief, elimination of corruption and energy production.

The renewed sense of optimism is based on small business owners' opinions that the overall business climate, long-term success of their business and revenue growth will improve as new the administration takes power.

"Every day, NWYC listens to small business owners across the country and this quarter's Index shows what we hear in the field -- that owners are encouraged by President Trump's first 100 days agenda and have a specific mandate for their members of Congress," said Randy Ford president of National Write Your Congressman. "The uptick in our members' confidence in the fourth quarter of 2016 is encouraging as we work to make their voices heard to Congress."

NWYC's poll represents the opinions of more than 1,000 NWYC members across 46 states in the construction, services, manufacturing and agriculture industries.

"As the engine driving the US economy, small business owners are revved up for a powerful first quarter and NWYC will be working alongside our membership of construction workers, farmers, machinists and financial service providers to make sure their voices and opinions are heard by Congress," said Ford.

(Source: NWYC)

After the New Year, the UK pound and FTSE 100 made significant progress, and according to reports, UK business confidence is at its highest in 15 months, eluding Brexit doomsday predictions.

BDO’s Optimism Index, which indicates how firms expect their order books to develop in the coming six months, increased from 98.0 to 102.2 in December, above its long-term trend. This signals that businesses are continuing to stay resilient following the referendum result, the pre-2017 declining value of sterling and volatility in the global economy.

Finance Monthly reached out to numerous sources this week, to hear their thoughts on the pivotal pushes behind this increased confidence, reasons behind the inaccurate predictions of how the Brexit referendum may have affected UK business, and how this situation may progress in 1Q17.

Alister Esam, CEO, eShare:

Personally, this turnaround wasn’t unexpected – I didn’t buy into the doom and gloom that surrounded Brexit at the time. When we leave the EU, the UK will have a GDP of nearly 25% of the EU and it’s hard to take seriously any worries about us not having a trade agreement. The UK is a great country for business that will soon be released – Europe will remain struggling with inefficiency and a currency that doesn’t work.

People are finally thinking clearly about Brexit and what it means for business. Because the referendum result was so unexpected, people hadn’t really thought through the consequences. Those that did were positive in the first place, and others are starting to see that too, now they have been forced to consider what the implications and opportunities are.

I think people originally focused on the negatives. Now it is really happening they have had to focus on their own plans with positivity and find the not-insignificant opportunities this brings in being able to define our own rules, set our own taxation etc. Furthermore, the negatives were false – people argued leaving Europe meant we couldn’t trade anymore, which was daft. By definition, we will be the most EU-aligned of non-EU countries so we will trade with the EU more than any other non-EU country in the world.

I believe we will still have a tough ride in the short term. There remains uncertainty about how exactly everything will fall into place, and leaving the EU was never good in the short term. – it’ll take time for the benefits to emerge.

The on-going uncertainty is likely to affect UK business optimism over the coming months. European leaders failing to get down and solidify a deal, dragging out negotiations to steal pennies from the UK at the cost of pounds and Euros to both. It’s in no-one interests for negotiations to drag on so let’s hope it can be resolved as quickly as possible.

John Newton, CTO and Founder, Alfresco Software:

A positive side effect of global uncertainty is that it helps to push business resiliency. Enterprises will be open to new competition in a deregulated environment driven by significant political change. This, in turn, will positively force corporations and governments to establish new models, based on best practices.

However, it will be impossible to predict the next five years. Companies should be weary of being too optimistic and instead adapt to become more agile and resilient, whether trade deals are good or bad, inflation or not, and growth or not. Therefore, businesses must focus on bolstering digital core competencies and adopting new ways of thinking at the start of 2017. This will enhance enterprise organisations’ ability to deal with both new threats and beneficial opportunities as they arise. Platform Thinking, will help leading edge enterprises to thrive. It creates a single, scalable, central solution through which organisations can route information, automate processes, and integrate third-party innovation. Additionally, instead of building business plans, new digital enterprises should compose their business outcomes through Design Thinking, which puts the user first and solves problems for them. Using this approach will help enterprises design and adapt digital initiatives to respond faster and engage customers who also face uncertainty.

Deregulation is coming, and enterprises should adapt. For example, Blockchain is impacting our financial markets in the way that party-to-party contracts are managed. In the beginning of 2000, when companies weren’t getting their return on investment in the stock market, they turned to the power of data and peer-to-peer directives. Furthermore, asset-light industries (companies with fewer physical assets, and that tend to require less regulation), will emerge as the marketplace winners. While in the technology industry, computing platforms are evolving so rapidly that it is forcing architects and developers to almost relearn computer science. Cloud platforms, in particular, are changing at astounding rates. New concepts around microservice architectures, deep learning and new data, and compute techniques will again challenge the old way of thinking about things.

UK business optimism is set to be tested but there are huge opportunities for us to adapt and adopt digital transformation objectives. In the Fourth Industrial Revolution, it is no longer about who hasn’t adopted digital technology, but those who have digitally and fundamentally transformed their business, creating a new platform to connect with customers. Think AirBnB and Uber.

Owain Walters, CEO, Frontierpay:

Economic data releases have surprised to the upside in post-Referendum Britain, which is very encouraging to see. Nevertheless, the pound has actually been in steady decline since the result of the Brexit vote and is yet to make a turnaround. What we have noticed, is that the pound has plummeted whilst the FTSE100 has prospered as a result.

We must remember that the FTSE100 is full of companies that derive their incomes from outside the UK, and so as the pound has declined since the Brexit vote, their non-GBP earnings are now worth more. As a result, earnings of the GBP denominated stock in these businesses have improved, however, we must not confuse this with a turnaround in the pound.

I would certainly agree that the catastrophic predictions forecast on the immediate impact of the Brexit decision have been proven wrong. Unemployment continues to fall, GDP growth has continued, and we have even seen some high-profile announcements somewhat quashing forecasts of a halt of foreign interest in British business.

However, we can’t thank the pound for these encouraging developments. In truth, the fact that Article 50 has yet to be triggered means that Brexit has yet to have any significant impact on the UK. What we are currently seeing is a great deal of volatility in the markets as we wait to find out what kind of relationship the UK will ultimately have with the EU.

As long as the future of this relationship remains unestablished and the government continues to keep any details of a deal firmly behind closed doors, I believe it’s too early to tell if the predictions for Brexit will be wrong in the long term. That said, in at least the first quarter of 2017, I think we can expect to see further falls in the pound, a jump in inflation and steady GDP growth of around 0.5%.

Lynn Morrison, Head of Business Engagement, Opus Energy:

We recently surveyed 500 SME decision makers to find out how they had been affected by the Brexit referendum result. We found them to be unmoved, with 72% stating that their confidence was either unchanged or increased. Looking forward, it was extremely encouraging to find that nearly two-thirds of the respondents say they expect their income to increase and even expect to grow their business, in terms of headcount, by up to 20% in the next two years.

Considering the initial market reaction to the Brexit result, as well as the sharp decline in the value of the pound and initial drops in the FTSE250, this positive response may seem unexpected; especially given how many larger, more established businesses have been reporting otherwise. It’s likely that this reaction stems from SMEs’ focus on working within the confines of the UK borders. The Department for Business Innovation & Skills estimates that less than 10% of all small and medium sized businesses export directly to the EU, and only a further 15% are involved in EU exporting supply chains. This makes it easier for SMEs to embrace a new trading landscape, possibly less restricted by EU red tape, enabling them to continue with a ‘business as usual’ mentality.

Another source of SME confidence may be the fact that between the declining pound and the potential changes in our trade relationship with the EU, the UK is likely to look to its own businesses to help fill the gaps on products and services that had previously been imported.

Making up 99.3% of all private businesses in the UK, and with a combined annual turnover of £1.8 trillion, SMEs are the lifeblood of our country and their success is invaluable. I think it’s therefore hugely encouraging for the future of British business, and indeed our future relationship with the EU, that SMEs are expecting to not only survive the result of Brexit, but also to thrive in the coming years.

Salvador Amico, Partner, Menzies LLP:

Levels of business confidence were high before the Brexit vote in June 2016 and many businesses were optimistic about the future, bolstered by a strong Pound and UK economy. The Brexit vote result caught many by surprise and created shockwaves across UK businesses.

However, since the vote, it is evident that the world hasn’t ended and that things have moved on. Businesses, particularly those with extensive export operations, who were concerned pre-Brexit vote, have found renewed confidence brought on by the weak Pound and continuing enthusiasm by suppliers and customers to trade with UK businesses.

The UK economy is fundamentally strong and is still considered a world leader in many sectors such as tech and manufacturing. Even the property sector, which is often considered to be struggling in the UK, is benefitted from continuing inward investment, brought about by a weak currency.

Whilst the weak Pound has certainly helped boost business confidence, the UK has proven itself to be a good place to invest for quite some time. Low tax rates and a competitive market presence, combined with strong connections and a creative attitude have long made Britain an attractive place to do business.

Optimism indices have likely been affected by a general feeling that the world hasn’t ended post-Brexit vote, particularly with the majority of business owners who voted for Remain. Many of these businesses are now feeling that everything will be fine.

There has been a real push from businesses in some sectors to break into new markets and to find new customer bases abroad. Whilst there is still much more work to be done, the sense of optimism brought about by a potential increase in competitiveness caused by leaving Eurozone, is hard to ignore.

Dropping tax rates along with the opportunity to introduce new policies to support UK businesses will further boost confidence across the board.

The effects that a weakening Pound would have were perhaps underestimated by some financial commentators, and in particular sectors such as manufacturing, businesses which export will currently be feeling very positive.

It is also important to note that it is perhaps too early to say that the predictions were wrong and we may find that a year down the line the UK economy will look significantly different. This was the case with the effects of the financial crisis in 2008, where it took several years for a ‘new normality’ to resume.

Once Article 50 is triggered it is possible that we may see a further slight dip in confidence if we see the Government move towards a hard Brexit, effectively closing off free access to the EU trade zone.

However, once negotiations begin it will be the media who will play a large part in controlling business confidence through the ways positive and negative news is reported in relation to specific business sectors.

We may see that the Pound is going to remain weak for some time and exporters should make the most of it while they can. There is also still a lot of activity in terms of inward investment coming into the UK and lots of parties looking to make deals and secure contracts. Capitalising on this investment, along with looking to secure the best talent possible – regardless of location – will be key for UK businesses in the coming months.

Problems faced across the Eurozone are very likely to have a knock-on effect for the UK economy and should not be overlooked. Upcoming elections in France and the Italian financial crisis, combined with any slow-downs faced by the EU economy could have a larger impact than many people realise.

The strength of the EU market will be particularly important for businesses selling goods abroad and if that market cools or becomes more turbulent, the ripple effect will be experienced by the UK economy.

Omar Mohammed, Operations and Financial Market Analyst, Imperial FX:

It was a turbulent year in terms of political turnarounds – the unexpected Brexit decision and the unexpected outcome of the U.S election made 2016 one of the most unprecedented years. That caused a lot of loses, suspension of business, re-planning of strategies.

The indices markets in UK and US were on record highs after the Brexit. For instance, FTEE100 is mostly American firms which mainly depends on USD, so whenever the Cable (GBP/USD) is down the FTSE100 is up.

Predictions wrong about the impact of Brexit because of inaccurate opinion polls; both the online and phone polls predicted the majority would vote to remain. The length of the polls needs to extend beyond three days in order to reach hard to reach voters. The less well educated are under-counted in the polls while graduates are hugely over represented.

The first quarter of 2017 expected to be volatile and complicated. The cause of this disarray could be that May herself is muddled. While vowing to make Britain “the strongest global advocate for free markets”, the prime minister has also talked of reviving a “proper industrial strategy”. This is not about “propping up failing industries or picking winners. Her enthusiasm for trade often sits uncomfortably with her scepticism of migration. Consider the recent trip to India, where her unwillingness to give way on immigration blocked progress on a free-trade agreement.

In coming months, UK business will be affected as they will be waiting mid-March for the EU meeting to triggered article 50 which involve heavily on free-trade market and the free movement of European citizens.

Markus Kuger, Senior Economist, Dun & Bradstreet:

Ever since the Brexit vote, the sentiment in the UK has been a melting pot of distinctly differing viewpoints. From Pro-Brexiters to remain campaigners, businesses have been expressing trepidation as the worldwide markets continue to fluctuate. The sterling may have recovered somewhat towards the end of 2016 but has quickly dropped in value, following Theresa May’s hint that the UK will be looking to secure a ‘hard Brexit’. The 14.4% rise that the FTSE 100 posted over the course of last year looks to be a distant memory for the UK; a reason for the end of year boost was arguably due to overseas businesses.

The plain fact is that Brexit has not happened yet and Britain has yet to leave the EU. Against his promise (on which our post-Brexit vote scenario was built on), David Cameron did not invoke Article 50 in the morning hours of 24 June but resigned instead, which has temporarily helped to minimise the effects of the Brexit vote. However, Dun & Bradstreet still expects the Brexit vote to have a significant negative impact on the British economy, especially as ‘hard Brexit’ is now the most realistic scenario.

At the moment, the export-orientated sectors of the economy are benefitting from the weak pound, while domestically-orientated businesses are still being supported by robust consumer spending. That said, the invocation of Article 50, expected towards the end of March, and a potential ‘hard Brexit’ will test the fragile stability of the UK economy, especially as sharply rising inflation rates will reduce households’ disposable income. We strongly recommend that businesses ensure they have the risk management measures in place to deal with the changes. Ensuring that the proper risk solutions are implemented will best prepare a business for any potential market fluctuations.

Although we now expect the government to lay out its Brexit roadmap in the coming weeks, uncertainty will remain high as it will remain unclear if the UK’s and the EU’s positions are compatible and whether a compromise regarding migration controls and market access can be found. Developments in financial services are likely to have a huge impact on the broader UK economy – the financial services sector, including professional services, makes up 11.8% of the UK’s GDP. The impact of firms looking to relocate outside of the UK could have a knock-on effect that leads to further disruption. Our own recent research indicates that 72% of senior financial decision-makers are planning for change post-Brexit. Against this background, we expect businesses to continue to operate smartly and cautiously, while overall prospects in the UK are likely to remain extremely unpredictable in Q1 and beyond.

For context, Dun & Bradstreet recently released a survey on business confidence after Brexit. The results showed that:

(This November 2016 research surveyed 200 senior financial decision makers from medium and large enterprises in the UK.)

Kerim Derhalli, CEO and founder, invstr:

Positive initial data which emerged in the aftermath of the EU referendum has been the catalyst for an ongoing good feeling among businesses, with positive momentum offsetting any continuing political uncertainty.

The UK economy performed well in the run up to June 23, with GDP growth at 2.5%, which helped to cushion any perceived negative impact. Since then, businesses have been buoyed by positive consumer data which has remained broadly optimistic.

UK businesses focused on exports – many of which feature in the FTSE 100 – have enjoyed a boost from cheaper sterling, and are becoming more competitive overseas. Cheaper comparative labour is also having a knock-on positive affect for exporters.

In addition to this, the UK services sector contributed to a 0.6% growth in the economy in the three months following the Brexit vote, fuelling confidence through the end of 2016 and into 2017.

What many observers failed to recognise in the build up to, and immediate aftermath, of the Brexit vote, is that the UK and London in particular still remain highly attractive to international investors.

The core fundamentals that make the UK a good place to do business are still present, and will remain whether the country is within or out of the EU.

The City of London is a world leader in attracting business talent, legal institutions are among the most respected in the world, and UK universities lead the way in innovation and research, continuing to draw students from across the globe. Plus, the UK has the lowest corporate tax rate in the G7 – making it attractive for businesses – and the commercial property sector remains a desirable asset globally.

Predictions underestimated the strength of the UK economy, and the country’s role as a global provider of world-class goods and services. The UK has plenty of reasons to remain optimistic about the future.

Political uncertainty will be the main driver behind any lack of optimism for businesses in 2017. At the moment, the Government looks no closer to confirming any specifics around the terms of agreement between the EU and the UK and, if uncertainty drags on, it could prove a drain on confidence.

That said, a cheaper pound and better global growth prospects, as well as all of the positive business investments we have already seen throughout the end of 2016 and early 2017, will help to offset the uncertainty. This, in combination with the ongoing good data, will serve to strengthen business and consumer sentiment.

We would also love to hear Your Thoughts on this, so feel free to comment below and tell us what you think!

Almost three in every five (57%) SME business owners say that they do not feel confident about the UK’s economic outlook for 2017, according to the Close Brothers Business Barometer. The quarterly survey questions over 900 UK SME owners and senior management across a range of sectors and regions.

Firms at the smaller end of the scale – under £500k annual turnover – were the least confident, with 64% answering ‘no’ to the question ‘are you confident about the UK’s economic outlook for 2017?’.

“Businesses owners are not taking a negative view, but they are being pragmatic about the UK’s economic prospects over the next 12 months,” said Neil Davies, CEO, Close Brothers Asset Finance. “There are still many unknowns and this uncertainty is reflected in what small business owners are telling us.

“For example, the value of Sterling is seen as a short-term issue and doesn’t create conditions for long-term investment. While activity in a number of sectors is stronger due to the weaker pound, helping to boost orders from overseas, cost pressures remain high with price increases being passed onto consumers, which may contribute to an increase in inflation down the road.”

Regional analysis

Business owners in the North East and Northwest of England were the most positive, with 56% and 54%, respectively, feeling positive about the year ahead, contrasting with the 36% of Scottish respondents.

Full list of regional responses to ‘are you confident about the UK’s economic outlook for 2017?’:

  Yes No
North East England 56% 44%
North West England 54% 46%
West Midlands 49% 51%
East Midlands 49% 51%
Wales 45% 55%
Yorkshire/Humberside 45% 55%
South West England 45% 55%
Greater London 45% 55%
South East England 43% 57%
East Anglia 39% 61%
Scotland 36% 64%

Sector results

The most enthusiastic sector was Manufacturing, which returned a positive response of 61%, followed by Engineering with 52%; Construction 49%; Transport 47%, and Print 37%.

“UK manufacturing in on a high at the moment, with recent rates of growth for production and new orders among the best seen over the past two-and-a-half years, according to the Markit/CIPS purchasing managers' index,” continued Neil.

“And this uplift in the manufacturing sector is reflected in what the survey respondents are telling us, which is that they see 2017 as a time of significant potential opportunity.”

(Source: Close Brothers Asset Finance)

Deepak Kapoor, Chairman, PwC India

Deepak Kapoor, Chairman, PwC India

CEOs in India continue to be more confident about the growth prospects of their business than their global peers, according to PwC’s 18th Annual Global CEO Survey

CEOs in other growth markets, unlike those in India, are much less confident now as against last year’s survey, PwC’s data finds.

According to PwC’s 18th Annual Global CEO Survey (India report), 62% CEOs are very confident of their growth prospects in the short term (12 months) as compared to 49% last year. Further, 71% of CEOs are very confident of growth in the next three years.

CEOs in India see more opportunities than threats. The PwC data found that 84% of CEOs in India see more opportunities while only 41 % see more threats as against what they perceived three years ago.

CEOs increasingly becoming concerned about multiple potential threats. The focal point of concern for CEOs in India continues to be inadequate basic infrastructure. The global CEO is more concerned about over-regulation, increasing tax burden, geopolitical uncertainty and government response to fiscal deficit and debt burden. The only threat common to both global as well as CEOs in India is the unavailability of key skills.

Deepak Kapoor, Chairman, PwC India said, “While the world economy rebalances post-recession, we see demographics and technology reshaping the market. CEOs in India seem to be benefitting on both counts - developments within and outside the country. Our survey reflects this exuberance of CEOs about growth of their businesses as also of the economy.”

CEOs in India are less concerned about disruption. Fewer CEOs in India believe that trends such as changes in industry regulation, customer behaviour, competition, distribution channels or core technologies will disrupt their industry over the next five years. While CEOs in China and Africa seem most sensitive to the disruptive nature of these trends, CEOs in India are below the global average across all these parameters. According to PwC, this raises a pertinent question, whether this indicates a lower degree of preparedness among CEOs in India.

Over the last few years, business focus of corporations seems to be shifting to what customers want. In India, 50% of the CEOs surveyed think it is likely that companies will increasingly compete in new industries over the next three years. Thirty-eight percent have already entered a new industry, while 11% have considered doing it within the previous three years. Expectedly, technology stands out as the industry from which CEOs, across the board, expect significant competition.

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