Business Confidence at a Three-Year High – Now is the Time to Capitalise

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Laura Cundall
28th January 2015

As the first month of 2015 draws to a close, UK businesses are increasingly optimistic about the year ahead. A handful of surveys have pointed towards confidence in the British economy stemming from improving labour markets and falling inflation, indicative of a positive economic outlook. Here’s a summary of why business owners should look favourably on 2015 and gear up for growth.

Increasing sales and profits

A poll by accountancy group Grant Thornton revealed the UK was one of the most optimistic economies in the final quarter of 2014, with 68 percent of executives admitting confidence for the coming year. A survey of 1,500 businesses by Lloyds Banking Group reported that 43 percent of companies expect an increase in sales, orders and profits in the first half of 2015. Confidence has been reinforced by news that the UK’s economy grew by 2.6 percent in 2014, the fastest pace since 2007. 

More cash in pocketsAfter a long period of falling real wages, the UK labour market is looking up. Lloyds Banking Group found that 20 percent of businesses plan to hire staff within the first 6 months of 2015. This employment growth bodes particularly well for domestic demand and hence business confidence. A Deloitte survey revealed chief financial officers anticipate wages in their businesses to increase by 2.9 percent this year which may suggest pay will increase above the rate of inflation for the first time since the recession.In December 2014 the Consumer Price Index reached its lowest point in 14 years and this deflation has boosted consumer capital. Falling prices for food, energy and petrol have contributed to rising levels of disposable income. This has successfully converted into spending with the latest Deloitte Consumer Tracker announcing that discretionary consumer spending has hit a 3 year high. Hotel, restaurant, large household appliances and consumer technology markets in particular have benefited.

Better access to credit has helped lift business confidence. The consumer confidence discussed above means that people are more likely to borrow. Credit growth accelerated to 6.9% in the 12 months to November 2014, the fastest growth in 8 years. Low mortgage rates and the belief that, in a time of the low inflation, the Bank of England will wait to increase interest rates have benefitted both the housing market and the consumer’s pocket. This in turn has inspired confidence in associated markets such as furniture and household appliance production.

Oil prices boosting disposable income

Falling fuel prices have helped instil confidence in both businesses and consumers. The price of a barrel of Brent crude oil fell almost 40% in last quarter of 2014. Not only does this mean lower transport costs for businesses, consumers also benefit from lower prices at the pump.  The average household spend on petrol is 5% of income but lower prices equate to an increase of nearly 1% in income to spend on other things.

On the back of increasing discretionary consumer spending, business investment is forecast to keep rising, reaching over 11% of UK GDP in 2015. Indeed, Lloyds Banking Group found that 16 percent of those asked expect to increase business improvement spending over the next year.

Is 2015 feeling like the right time to expand? If you’re thinking of hiring new people or targeting consumers with more disposable income, a rebuildingsociety loan could be just what you’re looking for.

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