SMEs think global as domestic confidence drops

British companies are ‘wisely’ placing their faith in overseas markets after a sharp drop in confidence and renewed fears over domestic demand for the first half of the year, a report reveals.


British companies are ‘wisely’ placing their faith in overseas markets after a sharp drop in confidence and renewed fears over domestic demand for the first half of the year, a report reveals.

British companies are ‘wisely’ placing their faith in overseas markets after a sharp drop in confidence and renewed fears over domestic demand for the first half of the year, a report reveals.

Lloyds Bank’s twice-yearly survey of more than 1,800 companies shows businesses are less confident than they were six months ago and most plan to raise prices to maintain profits, though the majority doubt the UK will slip into a ‘double dip’ resolution.

The Lloyds’ Business in Britain Confidence Index, which tracks business views on sales, orders and profits for the next six months, dropped to a balance of 12 in December from 18 in June. The index is now at the lowest point since recession-hit June 2009 when it plummeted to -30. The balance is the percentage of businesses expecting an increase minus the percentage predicting a fall.

More than half of respondents (57 per cent) say a weak home market poses the greatest threat to their businesses, with the retail sector (68 per cent) the most worried about the first two quarters of 2011 mainly because of the increase in the VAT and fragile consumer confidence.

Faced with an expected depressed local market, most business leaders are upbeat about potential for overseas trade. Two fifths (42 per cent) say they will grow exports in the next six months and a similar number (44 per cent) expect to continue current exporting at the same level. One in 12 (8 per cent) are planning for a fall.

Lloyds chief economist Trevor Williams says he expects a ‘more volatile start’ to the new year after strong growth in the final months of last year.

Williams adds: ‘Businesses have lost some of the confidence they had regained and are bracing themselves for a slowdown in trade.  They are also bound to be concerned about the likelihood of high inflation and the consequences for interest rates.’

He continues: ‘Across Britain firms are wisely placing their faith in the opportunities presented by overseas markets. Exports are no “silver bullet” for businesses seeking growth, but if firms can successfully harness demand outside the country, then there is hope that the economy can rebalance and that will bode well for the future. It remains the case that we should steer clear of a double dip.’

On investment, businesses remain cautious. The reports finds one in five (20 per cent) plan to boost investment in the first half of the year, while slightly more (21 per cent) plan to cut back – a similar result to that of the previous survey.

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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