Download UK BUSINESS CONFIDENCE MONITOR REPORT Q3 2010 WALES INSPIRING CONFIDENCE icaew.com/bcm

UK BUSINESS CONFIDENCE MONITOR REPORT
Q3 2010 WALES
INSPIRING CONFIDENCE
icaew.com/bcm
WALES IN Q3 2010
Confidence in Wales in line with UK
average. Seventy senior business professionals
in Wales were interviewed and record a
Confidence Index score of 22.4 in the Q3 2010
ICAEW/Grant Thornton UK Business Confidence
Monitor (BCM). The Welsh Confidence Index has
weakened by a marginal 3.2 points this quarter
and is now close to that of the UK as a whole.
Nationally the Confidence Index stands at 21.5.
BUSINESSES IN WALES REPORT
STRONG GROWTH
INVESTMENT AND R&D
GROWTH REMAIN WEAK
This quarter, Welsh businesses
report stronger annual growth in key
performance indicators than firms
across the rest of the UK. Turnover
rose 4.2% over the last year, while
gross profits increased 3.6%, both
notably above the UK averages of
1.6% and 1.7% respectively.
In Wales, capital investment
growth contracted by 0.5% in
the 12 months to Q3 2010. This is
marginally worse than in the UK as
a whole, where annual capital
investment growth was flat over
the year. Growth in investment
in research and development was
also marginally behind the UK as a
whole, at 0.2% compared to 0.8%.
Expectations for turnover and profits
over the next 12 months have also
strengthened since last quarter, with
turnover growth forecast to rise from
5.0% to 5.5%, and gross profits
growth forecast to rise from 4.6%
to 5.6%. This is also a more positive
picture than for the UK as a whole,
where expectations of future
turnover and profits softened in
Q3 2010. Robust annual growth in
both exports and domestic sales is
also reported this quarter in Wales.
However there are high profile
reports which are considerably less
encouraging, notably the prospect
of Welsh Language Channel S4C
losing as much as 24% of its
government grant over the next
four years.
Welsh businesses are expecting to
increase their capital investment and
research and development budgets
over the coming year, with an
expected increase of 2.0% and 1.1%
respectively, broadly in line with
forecasts for the UK as a whole
(2.0% and 1.4%).
Cuts to the Welsh Assembly
Government Department for
Economy and Transport, which
provides grants for capital investment
to businesses, could hinder
investment plans in Wales.
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EMPLOYMENT GROWTH
RETURNS TO POSITIVE
TERRITORY IN WALES
FIG. 1 BCM CONFIDENCE INDEX TREND IN WALES
40
30
20
10
0
-10
-20
-30
Wales
-40
UK Average
-50
-60
Q3
Q4
2006
Q1
Q2
Q3
2007
Q4
Q1
Q2
2008
Q3
Q4
Q1
Q2
Q3
Q4
2009
CUSTOMER DEMAND
LESS OF A CHALLENGE
ACCESS TO CAPITAL ISSUES
SUBSIDE IN WALES
The proportion of Welsh businesses
reporting customer demand to be
a greater challenge to business
performance than 12 months ago
has fallen to under one third (28%)
this quarter, down from 42% in
Q2 2010 and 54% a year ago.
This is the fifth consecutive quarterly
decline in Wales. Nearly four in ten
firms (37%) across the UK as a whole
report this trend this quarter.
This quarter, the proportion of
businesses in Wales reporting access
to capital to be a greater challenge
than 12 months ago is close to the
level seen before the worst of the
credit crunch. Fewer than one in
five firms (18%) report this trend
in Q3 2010, compared to 40% a
year ago. Although bank lending
is reported to be constrained, other
ICAEW work has found demand for
new debt to be limited as firms work
to manage their costs by other
means.
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Q1
2010
Q2
Q3
Firms in Wales report headcount up
by 0.5% over the year to Q3 2010.
This is the first time employee
numbers have expanded since
Q4 2008, and compares favourably
to the UK as a whole where
employment has declined by 1.3%.
Welsh businesses are also expecting
to hire 1.2% more employees over
the next 12 months. Electronics
giant Sharp announced a £30m
investment at its Llay factory, with
the potential to create hundreds
of jobs as the firm doubles
production of solar cell modules,
while construction of one of the
world’s largest offshore wind farms
in North Wales is hoped to generate
1,000 construction jobs.
Wales will, however, be hit by
upcoming public sector spending
cuts. Public sector spending
accounts for about 62.8% of GDP
in Wales. Significant job cuts within
the Police, Welsh NHS, universities
and local authorities are on the
horizon and will inevitably lead to a
contraction in consumer demand for
goods and services.
ICAEW
ICAEW Wales
PO Box 4274
Cardiff CF14 8GA
T +44 (0)29 2002 1481
icaew.com/wales
© ICAEW 2010 MKTPLN9550