Business confidence increased slightly in the North East as economic uncertainty remained the biggest threat to firms, according to the latest Business in Britain report from Lloyds Bank.
The report’s confidence index – an average of respondents’ expected sales, orders and profits over the next six months-rose slightly to 22 per cent, up from 21 per cent, the survey’s score in September 2016.
North East firms are the most optimistic in the country, soaring about the capital and overtaking Yorkshire and Humber and Wales.
Leigh Taylor regional director for SME in the North East, Lloyds Banking Group said: “Business confidence in the North East has increased since September, a sign that despite political and economic uncertainty we are entering 2017 with optimism.
“While this year may present more challenges for businesses, firms in the North East will want to start planning in earnest once details around the UK’s exit from the EU became clearer.”
Challenges
The most commonly identified threat cited by North East firms in the next six months was economic uncertainty (28 per cent), followed by weaker UK demand and political uncertainty (15 per cent) as firms wait for further details of Britain’s EU exit.
Firms also cited negotiation (13 per cent) and input costs (six per cent) amongst the biggest threats to their business.
Jump in export intentions to US/Canada
Overall, the net balance of firms anticipating stronger export sales in the next six months increased significantly to 45 per cent from -14 per cent in September.
This upturn was led by a big increase in the number of firms anticipating stronger exports to US/Canada and Europe.
Businesses indicated that the current exchange rate is favourable for their export sales because the pound is at its weakest since its last big depreciation in 2009 during the global financial crisis.
The weaker pound also contributed to a rise in firms’ pricing intentions. The net balance of firms expecting to increase their prices in the coming six months increased to 39 per cent from 18 per cent.
Businesses planning to hire despite difficulties
The region’s firms are expecting to raise their staffing levels in the next six months. A net balance of minus two per cent planned to recruit new staff, up from minus six per cent in September.
The share of firms saying they are experiencing difficulties in recruiting skilled labour also fell to 33 per cent from 39 per cent.
Leigh Taylor, continued: ““It’s great to see that despite challenges, firms in the North East are planning to increase their export activity to Europe and the Americas. Coupled with our help, businesses should have the confidence that their growth ambitions can be supported in the year ahead.
“While this year may present more challenges for businesses, including understanding the impact that leaving the EU will have, North East business owners are resilient and continuing to do what they do best – getting on with growing their businesses.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “The weaker pound has given a huge boost to exporters as they look to their traditional export markets of the Americas and Europe.
“However this has also led to a jump in the number of firms intending to raise the price of their goods and services in response to higher costs. As a result, we would expect inflationary pressures to rise this year.”
The Business in Britain report from Lloyds Bank, now in its 25th year, gathers the views of over 1,500 UK companies, predominantly small to medium sized businesses, and tracks the overall “balance” of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.