South East businesses grow in confidence and look for international profits

Published by Andrew Griggs on 29 July 2024

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The quarterly national business confidence survey from the Institute of Chartered Accountants in England and Wales (ICAEW) reports that confidence amongst South East businesses has risen sharply and is now at its highest for two years.

Senior Partner and Head of International Andrew Griggs goes behind the headlines and looks forward to the final two quarters of the year.

The ICAEW surveyed 1,000 members across the UK and industry sectors to build a representative picture of the UK economy. Its Q2 findings, published in July, make for encouraging reading.

It finds:

  • Business sentiment across the South East is now ahead of most other UK regions.
  • Export and domestic sales growth have, however, continued to fall. Whilst currently below historical averages, businesses in the South East expect to see considerable improvement over the next 12 months.
  • Input price inflation continues to decline across the region and remains stronger than selling price growth. This has hurt profit growth. Strong profit growth is expected for the year ahead as businesses increase prices at a sharper rate than cost inflation.
  • Regulatory requirements placed on businesses are cited as the most significant challenge, followed by market competition.
  • Businesses in the South East have made the greatest levels of capital investment across the UK over the past 12 months, although that is expected to level out over the year ahead. Research and Development (R&D) budgets have remained largely unchanged.
  • South East businesses have reported a marked increase in late payments by customers, well above the national average.

Resilience and opportunity

Businesses in the South East are cautiously optimistic for the next 12 months, with sentiment having increased for the third consecutive quarter. This confidence is without doubt underpinned by falling inflation and strong financial performance of businesses across the region.

The change in government on 4 July may add to that sense of optimism. Policy announcements have begun to emerge to back up its election manifesto and its Autumn Budget will undoubtedly be a cornerstone of future business confidence and will be closely watched.

It is, however, concerning to see a continued fall in domestic sales growth alongside an increase in late payment by customers. Both will need to be closely watched as they will have cash flow implications and may impact any growth investment plans.

The ICAEW survey suggests businesses in the South East expect to see export sales growth increase by almost 6% in the year ahead. Kreston Global in June this year published its biennial Interpreneur report, in which 25% of the 1,400 businesses surveyed pointed to ‘significant’ international growth, with over 50% expecting ‘moderate’ international growth.

It is clear that ambitious businesses look beyond our national borders for growth opportunities despite the continued uncertain geopolitical picture.

How should businesses respond?

International growth, as the Kreston Global Interpreneur report highlights, provides businesses with higher profits, increased and more diversified revenue streams and a stronger competitive advantage.

But it is not without its challenges. International growth brings complex compliance requirements, challenging logistics and supply chains and, of course, considerable tax implications in each country where it operates. Geopolitics and social disruption will add further complications.

But the good news is that businesses need not make those decisions and face those challenges alone.

Kreston Reeves and its network of 160 independent accounting firms working across 114 countries is well placed to help businesses better understand and prepare for global growth. We can help businesses identify target countries, the approach to growth in those countries, and partners on the ground to guide them through the compliance and tax implications of doing business overseas.

To learn how we can help, contact our expert advisers today.

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