10 corporate recovery Business confidence up
Business confidence in the South East is at its highest point since Q2 2010 according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM). Senior business professionals interviewed in the region recorded a confidence index score of +12.0 which is in line with the national level of confidence.
Despite this rise in confidence, market conditions in the South East are a key concern for local businesses. Half of firms report levels of customer demand as a greater challenge now than a year ago. Competition is also increasingly being cited as a rising challenge with 44% of firms reporting this in Q2 2012 compared to 36% in Q2 2011.
However, firms in the South East are expecting an improvement in financial performance. Turnover growth of 5.4% is forecast for the coming 12 months and predicted gross profits and sales volumes growth for the next year have also been rising in 2012, reaching 4.8% and 5.2% respectively this quarter.
In addition, labour market conditions have improved in the South East seeing private sector employment growth and average headcount increases of 1.4% over the past year. Further to this, employee numbers are expected to grow over the coming 12 months by 1.9% which is the strongest growth rate to be forecast in the region since Q1 2011.
Businesses in the South East also expect to increase capital investment over the coming 12 months by 1.3%.
Speaking of the findings ICAEW‘s South East regional director Fay Webster said: “Although there has been a large increase in confidence there is still an air of fragility to the economy. Government needs to harness businesses‘ increasing optimism about the South East‘s economic future and turn it into sustainable, consistent growth.
“South East businesses have predicted good levels of growth in financial performance, employment and investment over the coming year. In line with the business investment growth predictions by the Office for Budget Responsibility (OBR), rising investment growth in the South East will help to boost the region‘s economic prospects.
“Furthermore, the official market statistics show that the regional unemployment rate has fallen over the past quarter by 0.1 points. The unemployment rate for the region was 6.3% in the three months to February, remaining well below the national average of 8.3% for the same period. In addition, a £35 million pot is being launched by the Regional Growth Fund in Kent offering interest-free loans to businesses that are looking to expand. The initiative aims to create 5,000 new jobs in four years.“
Hampshire insolvencies down
The number of new individual insolvencies in Hampshire has declined to its lowest level in three years according to insolvency trade body R3.
The news comes as figures were published by The Insolvency Service showing that the rate of total individual insolvencies per 10,000 adults in Hampshire decreased from 27.8 in 2010 to 24.7 in 2011. The figures include bankruptcy orders, debt relief orders (DROs) and individual voluntary arrangements (IVAs).
The overall number of individual insolvency cases in Hampshire is in line with the national average, however the figures paint a mixed picture of the state of financial affairs throughout the county.
Havant had one of the largest decreases in personal insolvency rates in Hampshire – dropping by 7.6 points to 27.1 per 10,000. Portsmouth also had a large decrease – dropping by 4.7 points to 26.7 per 10,000. Neighbouring Fareham saw a small decrease from 25.7 to 23.2. Meanwhile Gosport‘s fell by just 0.8 points to 41.3 per 10,000.
In Southampton the total personal insolvency rate dropped to 28.4 and is at its lowest since 2005. Eastleigh has remained similar to 2010, with a fall of just 0.5. Further down the M3 Winchester‘s figure increased by 1.5 points to 19.4 per 10,000. However, it still holds the title of having the lowest individual insolvency rate in the county.
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Heading further north Basingstoke and Deane‘s rate has seen a modest decrease on 2010 – falling from 29.5 to 25.2 per 10,000. The number of individual insolvencies in Isle of Wight has risen by three points in 2011 to 41.8 per 10,000 and is at its highest since the record began in 2000.
Nick Keitley (pictured), chairman of R3‘s southern committee, stated: “While it‘s encouraging to see some decrease in the number of insolvencies the figures are still higher than I would like to see and the recent fall may well be attributed to people going into informal debt management plans instead.
“R3‘s latest personal debt snapshot found that 39% of individuals are worried about their current level of debt and I would encourage anyone facing personal debt to seek the advice of a professional earlier rather than later.“
UK business prospects improve
The UK‘s short-term business prospects have improved, with the consensus on current trading reaching a 12-month high. However, the eurozone crisis has cast a dark shadow over longer-term growth prospects by undermining UK business confidence, according to the latest Business Trends report by accountants and business advisers BDO LLP, based in Ocean Village, Southampton.
BDO‘s Output Index, which reflects the current experience of UK business people and therefore predicts GDP one quarter ahead, climbed to 96.7 in May from 95.8 in April. This is the third consecutive month that the index has climbed above the 95.0 mark that indicates growth, and stands at the highest level seen for a year. This suggests that the UK will experience growth from the middle of 2012.
Conversely, BDO‘s Optimism Index has dropped for the third consecutive month, from a peak of 98.0 in February to 95.5 in May. The index measures business performance two quarters ahead and suggests that UK businesses expect growth to tail off later in 2012.
Malcolm Thixton, lead partner at BDO LLP Southampton, commented: “Given that half the UK‘s export goods go to the eurozone, it‘s hardly surprising that the ongoing turbulence there is denting longer-term growth prospects here. The biggest issue for UK businesses at the moment is that the strength of the pound against the euro has made UK exports much more expensive, significantly denting export and growth prospects.“
Against the backdrop of longer- term uncertainty, this month BDO‘s Employment Index has also declined, to 94.9 from 95.5 previously. Its return to below the 95 level points to continued weakness in the labour market, indicating that employment may fall in 2012.
Thixton continued: “While the UK economy is currently doing ‘Ok, considering‘, it‘s clear that UK business people are worried by the eurozone crisis and are scaling back plans for hiring and investing. This massively threatens the already fragile growth prospects for the economy.
“The Government‘s plans to shrink current spending by the state remain a necessity, but a fantastic opportunity is being missed to build high-quality infrastructure cheaply, taking advantage of the very low borrowing rates that the Government can source currently. More energy and imagination than we have seen so far is required to access this opportunity.“
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – JULY/AUGUST 2012
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