Payments late, confidence negative and economy weakening: little cheer from ICAEW

The latest ICAEW Business Confidence Monitor (BCM) shows a rising proportion of British businesses reporting late payment as an increasing challenge for their performance compared to a year ago. According to the BCM, late payments from customers are a greater challenge than a year ago for one in five businesses (20%).

Six out of nine sectors (Property, Business Services, Manufacturing & Engineering, Construction, Retail & Wholesale, and Banking, Finance & Insurance) are experiencing this as a growing issue, while nearly a quarter (24%) of SMEs report the same issue.

Other key findings from ICAEW’s BCM include business confidence still negative this quarter at -10.3, though higher than in Q2 2019 when it was -16.6. However, whereas in Q2 confidence trended upwards, within Q3 it has trended downwards, impacted by events such as British Steel’s insolvency and the announcement of the closure of Ford’s Bridgend plant, as well as evidence of a global slowdown and international political anxieties, particularly with regard to Iran. The downward trend has reversed gains that were seen after the extension of Article 50 in April this year, and confidence is now almost at the same level as it was in the quarter after the Brexit vote in 2016.

Business confidence is negative in every sector, but particularly in Retail & Wholesale, Property, and Transport & Storage. Confidence among SMEs is not as negative as of FTSE 350 and foreign-quoted companies, as larger businesses may be more exposed to external factors such as trade wars and protectionism.

Finally, the outlook for the overall economy is not cheerful with GDP growth likely to be very weak in the second and third quarters of 2019. The BCM’s Confidence index suggests that the UK could see growth of only 0.1% in Q2 and 0.2% in Q3. There was a boost in Q1, as businesses increased their stocks in preparation for a ‘No Deal’ Brexit on 31 March, but GDP growth in the rest of 2019 looks likely to be subdued. This combined with very low (negative) confidence points to weak growth in Q2 and Q3.