Download UK Business Confidence Monitor Report Q4 2014 Wales BUSINESS WITH coNfIdENcE icaew.com/bcm

UK Business Confidence Monitor Report
Q4 2014 Wales
BUSINESS WITH confidence
icaew.com/bcm
Confidence holding steady
Marketplace conditions
easing
Illustrating increasingly stronger
marketplace conditions, fewer
businesses in Wales see customer
demand as a problem this quarter.
The share of firms reporting this
factor as a greater challenge now
than a year ago has fallen to
just 22%. This follows a general
downward trend from roughly half
at the start of 2013.
In the Q4 2014 ICAEW/Grant Thornton UK
Business Confidence Monitor (BCM), 60 senior
business professionals in Wales were
interviewed and record a Confidence Index
score of +28.7. Confidence in Wales has
remained broadly stable during recent
quarters and continues to stand well into
positive territory.
With a more buoyant business
environment, companies are also
reporting rapid growth in key
financial indicators. Over the past
year, turnover rose by 5.9% and sales
volumes increased by 6.2%. As the
economy has gathered momentum,
both of these annual growth rates
are faster than they were at the same
point a year ago.
In line with stable confidence levels,
businesses also expect this rate of
expansion to continue over the year
ahead. This is good news for the
economy of Wales which, according
to the latest statistics from the Welsh
Government, has been expanding
more slowly in recent quarters than
the UK as a whole.
Labour market improving
but skills shortages
emerging
With improved market conditions,
businesses in Wales have been
increasing employment at a faster
rate to meet increasing demand.
Over the past 12 months, average
staff headcounts increased by
2.6%, up from 1.4% year on year
in Q4 2013. This private sector job
creation has helped to bring down
Wales’ unemployment rate to 6.5%,
the lowest since mid-2008.
However, with a tighter labour
market, skills-shortage issues are
emerging. This quarter, 26% of
businesses report that the availability
of non-management skills is more
of a challenge than a year ago,
up from just 5.0% at the same time
in 2013. A similar upward trend is
being seen for firms regarding levels
of staff turnover.
A lack of skilled workers is one factor
that may constrain growth over
the medium term. Hence, companies
in Wales have tried to mitigate this
risk by increasing staff development
budgets, by 4.1% over the past year
alone.
icaew.com/bcm
Fig. 1 Bcm confidence index trend in WALES
Wages rising in real terms
As a result of the tightening labour
market, businesses in Wales are
increasing staff wages at a faster rate
in order to attract or retain a skilled
workforce. Over the past year, average
total pay increased by 1.8%, up from
the 1.1% annual rise seen in Q4
2013. Further similar increases are
expected for the year ahead.
60
50
40
30
20
10
0
-10
-20
Wales
-30
UK Average
-40
Q4
Q1
Q2
Q3
2010 2011
Q4
Q1
Q2
2012
Q3
Q4
Q1
Q2
Q3
Q4
2013
Q1
Q2
Q3
Q4
2014
Fig. 2 Q4 2014 – WALES Average % change in ...
% 8
Change
7
6
5
4
Versus last 12 months
3
2
Expected next
12 months
1
0
Turnover
icaew.com/bcm
Sales
(Volumes)
Average
Total Salary
Number of
Employees
Slowing inflation has been one of
the key trends emerging in 2014.
This means that wages are now
rising in real terms for the first
time since the 2008-09 recession,
boosting consumer demand. In
September 2014, UK consumer price
inflation was just 1.2%, the slowest
that it has been in five years.
The UK inflation outlook for the
next year is also relatively weak,
suggesting that wages are likely
to continue rising in real terms.
The Bank of England in its August
Inflation Report projects consumer
prices to still be rising year on year
at just 1.7% by Q4 2015.
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© ICAEW 2014 MKTPLM13584 11/14