1. Q1 2012 ICAEW / Grant Thornton Business Confidence Monitor results
6 February 2012
Contact: Caroline Florence

2. Outline Key findings Confidence index top lines
Financial performance indicators
Growth indicators
Inflation & labour market indicators
Regional & sector stories
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

3. Key findings
Capital investment growth expectations have continued on a downward trend this quarter, suggesting that businesses are cautious about future economic prospects.
The share of businesses reporting stock levels to be above normal has risen again this quarter – suggesting that we could see destocking in 2012.
Expected salary growth remains extremely weak and private sector job creation remains weak as businesses plan for uncertainty.
Turnover and profit growth expectations remain well below levels seen prior to the financial crisis although did not deteriorate significantly this quarter.

4. Outline Confidence index top lines Financial performance indicators
Growth indicators
Inflation & labour market indicators
Regional & sector stories
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

5. Confidence Index remains in negative territory but notably avoids another decline ICAEW / Grant Thornton Business Confidence Index
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

6. Confidence broadly unchanged following record decline last quarter Quarterly change in ICAEW / Grant Thornton Business Confidence Index
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

7. Shorter term trend shows some encouragement
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

8. So what does this mean for growth
So what does this mean for growth? On the face of it BCM implies the UK is in a recession (two consecutive quarters of negative growth) Quarter on quarter real GDP growth, per cent
ONS revisions mean the BCM Confidence Index was right about growth in Q3 2009
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

9. Outline Confidence index top lines Financial performance indicators
Growth indicators
Inflation & labour market indicators
Regional & sector stories
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

10. Turnover growth – and expectations – remain modest and significantly below pre-recession levels Turnover, annual percentage change
Pre-recession average:
Reported = 6.5%
Expected = 6.4%
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

11. Reported profit growth still low although encouragingly expectations for growth did not decline further Gross profits, annual percentage change
Pre-recession average:
Reported = 5.3%
Expected = 5.8%
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

12. Domestic demand growth remains weak; consumers to be hit by low earnings growth & rising unemployment in 2012 Domestic sales, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

13. Reported export growth stable and expectations remain anchored; but growth is below post-recession peak Exports, annual percentage change
Pre-recession average:
Reported = 3.6 %
Expected = 3.7 %
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

14. Capital investment growth expectations continue on downward trend as businesses plan for uncertainty Capital investment, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

15. Just under half of businesses report customer demand as greater challenge than a year ago Share of businesses reporting customer demand as greater challenge
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

16. Increasing share of businesses with above normal stocks of finished goods – destocking to come in 2012? Share of businesses with stock levels above normal
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

17. Although signs of bout of destocking are not evident yet, this is something to watch closely in 2012 Share of businesses with stock levels below normal
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

18. Over half of businesses continue to operate below capacity Share of businesses running at or below capacity
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

19. Outline Confidence index top lines Financial performance indicators
Growth indicators
Inflation & labour market indicators
Regional & sector stories

20. Price growth looks set to fall back Prices, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

21. Input price inflation expected to fall in 2012 Input prices, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

22. Job creation in the private sector labour market remains modest in uncertain times – this rate of growth will not be strong enough to prevent unemployment rising in 2012 Employment, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

23. SMEs to be the main driver of job creation
SMEs to be the main driver of job creation? Employment, annual percentage change, Q1 2012, by size of business
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

24. Considerable slack in the labour market compared with before the financial crisis Net percentage balance of firms reporting factors to be a greater challenge to business performance
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

25. Expected salary growth continues on downward trend Average total salary, annual percentage change
Source: ICAEW / Grant Thornton Q Business Confidence Monitor

26. Outline Confidence index top lines Financial performance indicators
Growth indicators
Inflation & labour market indicators
Regional & sector stories

27. Trend of Business Confidence by Region

28. Trend of Business Confidence by Industry Sector

29. Trend of Business Confidence by Company Type

30. Conclusions
On the face of it, Confidence Index points towards economic contraction in Q1 2012; this would mean the UK is already in the midst of a double-dip recession.
However, key indicators have not deteriorated significantly this quarter; marginal positive growth is possible; recession not guaranteed.
Financial performance indicators continue to show little sign of returning to pre-financial crisis levels, meaning the economic recovery is likely to be slow
The Confidence Index is in negative territory for most regions and sectors although hi-tech is a notable bright spot
Labour market weakness is likely to continue, with job creation and employee salary growth very subdued
Inflation looks set to fall in 2012