Business confidence in the UK has declined to a four-year low, according to the Institute of Chartered Accountants in England and Wales (ICAEW). A poll of 1,000 chartered accountants conducted by the accounting body showed a majority of them were pessimistic about business prospects over the next 12 months.
The reason for the pessimism is said to be rising labour costs in the country, the slowdown in China and worries over the EU referendum in June. The ICAEW/Grant Thornton Business Confidence Monitor (BCM), a dataset which indicates future economic trends, came in at 0.8 in the second quarter. While this barely made it into the positive territory, it was a whole lot down when compared to the 11.4 reading in the previous quarter.
"Business confidence is fragile and there is an absence of resilience in the UK economy at the moment. A combination of factors has led to this negativity and includes the EU referendum, slowing domestic sales, Chinese growth slackening and the recent budget," Michael Izza, chief executive at ICAEW said.
"Businesses cannot plan with confidence and this applies regardless of sector, ownership or size of company. Weakening growth will also mean lower tax receipts for the chancellor, making it even harder for him to meet his deficit goal," Izza added.
While the outcome of the poll is line with other recent surveys, it also revealed a slowdown in domestic sales and nervousness among employers in hiring. Other findings from the poll were that a weaker pound had contributed to increased export sales, while shortage of skilled labour was not as big a worry as it was 12 months ago. Salaries too were expected to increase by 2% over the next year, according to the poll, which is conducted every quarter.
While official data indicates that the growth in gross domestic product (GDP) had already declined to 0.4% in the first quarter, compared to 0.6% in the previous quarter, the latest decline in confidence suggests the GDP will grow by just 0.3% in the second April-to-June quarter.