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Business Confidence – up or down?

John Nelligan


The Institute of Chartered Accountants in England & Wales (ICAEW) publish a quarterly UK Business Confidence Monitor and Q4 2019 has been published this month (you can see full report here).

The headlines are:

The key findings this quarter are:

  • Confidence has weakened over the past five years, now reaching the lowest level since the start of 2009.
  • Depressed confidence is both a cause and consequence of slow sales growth, with exports looking particularly weak.
  • Modest profit rises reflect slower sales and limited selling price increases. Plus, expectations for the year ahead have fallen.
  • Weak productivity is also a reason for slow profit growth – only 39% of companies are increasing their productivity.
  • Slow sales and profit growth feed through to less investment growth, with plans for the year ahead particularly low.
  • Companies are continuing to restrict employment growth, with fewer seeing skills shortages as a growing business challenge.

What does this mean for the UK’s SME businesses?

My own view (controversial as it may be) is that for the vast majority of SME’s, unless their business activities (either turnover or overhead such as labour) relate directly to trade with the EU, Brexit will have little effect overall on their business.  This being said, most SME owners are understandably worried about what might happen.

Let’s look at two of the key findings for you:

  • Confidence has weakened over the past five years, now reaching the lowest level since the start of 2009.


It’s true: confidence is low and is a negative 20% level compared to 2009.  But what other factors are contributing to this?

The impacts on business confidence are generally caused by Social, Technological, Economic and Political (STEP) trends.  In particular, the Political issue that is clearly at the forefront of businesses’ concerns at the moment is Brexit. The loss of the Government’s majority, an imminent general election, and the implications of a possible ‘no-deal’ Brexit are all likely sources of anxiety, explaining why confidence declined further during the Q4 survey period.

But how confident are you with your own business activities?  Carrying out a STEP analysis on your business can often show hidden positives as well as the more obvious negatives.  When was the last time you carried out an overall health check on your business?  Have you looked at its performance, levels of sales or how its people are contributing towards the business goals?  You may be surprised that Brexit is having (or will have) less of an effect going forward than you may fear and the business is performing more successfully than you think, but with room for improvement!

  • Modest profit rises reflect slower sales and limited selling price increases. Plus, expectations for the year ahead have fallen.


The reasons for weak growth in company earnings are clear.  Sales have been growing slowly and, partly as a result, selling prices have not kept pace with costs. The increase in input prices in the year to Q4 2019 is 2.2%, and so too is the rise in total salaries. In contrast, prices charged to customers are up by only 1.1%.

Why have prices not kept pace with rising costs?  In reality, the answer is simple: fear!  Most businesses, particularly SME’s, have an almost ingrained fear of putting prices up “in case we lose customers”.

What would actually happen if you did put prices up?  My thoughts:

  • There would be an inevitable loss of customers. However, those losses would most likely comprise customers whose primary buying criteria is price.  They buy from you because you are the cheapest, not because you are the best.  If someone else can provide the a similar product or service at a cheaper price, those customers would switch to the other supplier in a heartbeat.  They have no loyalty to you except for the lowest price and you are always at risk of losing them;
  • Those customers that remain after a price rise do so because they value your product or service higher than its price. This confirms that they value the way you run your business (your Core Values); or they particularly like the quality of the product/service or your customer service levels (your Core purpose) and are willing to pay a premium over a cheaper supplier;
  • Those customers that favour you would also be more likely to continue to buy from you.  You have the opportunity to strengthen ties and relationships with them so they are less likely to look elsewhere;
  • When you have a “loyal” customer base, you have a better chance to sell more to them. You can explore whether or not they will buy more of the same or other products/services although you’ve never asked them to do so before;
  • Happy (loyal) customers are also more likely to become your advocate. They will sing your praises to their own business contacts to allow you to grow your customer base.

Do you have a strategy for addressing the problems you may be facing?

It seems to be all “doom and gloom” according to the Confidence Monitor.  But it doesn’t have to be.  Every business is unique – it sounds a little trite to say this, but it’s still true!  Every business most likely has a Business Plan.  Unfortunately, most Business Plans are snapshots of the business at a fixed point in time and don’t represent a flexible active plan, or strategy, for taking the business forward.  Business Plans are almost universally rigid and inflexible when the inevitable bumps in the road appear.

Those bumps cause invasive thoughts that keep you awake at night; business headaches that cause you to toss and turn.  Whether you’re worrying about investment and cashflow, anxious about sales and customers or agonising about under-performing employees and inefficient systems, contacting us for a friendly chat is the first step towards positive action.

As a Business Doctor, I don’t coach; I actually get on to the pitch with you. Our hands-on, pragmatic approach will help to maximise results, find and exploit your competitive edge and ensure you stand out from the crowd.  In supporting you, Business Doctors make a difference by sharing and applying the lessons we’ve learnt in the business world.  Driven by our passion for business, we help you to navigate those bumps, and then fast track your growth.

For more information about our services, and particularly a free health check, get in touch with me on 07976 260065.  My profile as an introduction is here.