Capturing the mood of UK senior business professionals, the latest ICAEW Confidence Monitor shows some encouraging trends as we head into the Autumn Budget.

Encouraging signs

Profit growth rose from 3.4% to 4.1% between Q3 and Q4 which, whilst hardly meteoric, is heading in the right direction. Rising sales, a slowdown in input price inflation and moderate wage growth underpin the current improvement and a steady rise to 4.1% is expected by the end of 2018.

Employment is rising to support increased sales growth, whilst salary increases remain steady. This indicates that a salary rise spiral is unlikely.

Investment is also rising. It is expected to remain modest as 49% of respondents are reporting spare capacity. However, technological change and competitive pressure are pushing investment over predicted levels.

Continuing challenges

The positive economic indicators are moderated by continuing challenges in the wider environment.

An increasing number of companies are identifying regulatory requirements as a challenge. In Q4, 45% of respondent companies are experiencing difficulties in meeting regulatory obligations such as the Apprenticeship Levy and forthcoming General Data Protection Regulation (GDPR). Concerns over Brexit are naturally causing uncertainty also.

The availability of employees with non-management skills remains a concern, particularly for sectors such as manufacturing and retail/wholesale that rely heavily on this category of workers. This is probably the reason for the growth in investment in staff development in these sectors, as employers seek to retain their staff.

You can read the complete ICAEW Business Confidence Monitor report for Q4 2017 here.

For help and advice on responding to the challenges facing your business, contact Adrian Le Roux.