Global economic tremors hit South West businesses

By Anita Jaynes on July 07, 2015

Business confidence fell this month amid uncertainty over overseas markets, according to the latest Business Trends Report by accountants and business advisers BDO LLP in the South West.

BDO’s Optimism Index has dropped to its lowest level – 103.9 – since November 2014. This reflects firms’ concerns that the continued Greek chaos and a potential slowdown in China’s economy, sparked by a plunging stock market, could soon affect their own prospects.

Falling confidence is driven in particular by pressures in the manufacturing sector, with BDO’s Manufacturing Optimism Index plummeting to 98.5 (from 103.4) this month. It is now below the long-term trend rate for the first time in two years, showing that little progress has been made in rebalancing the economy away from the service sector and demonstrating how global uncertainty could hamper the exports market.

Businesses’ output expectations mirror the dampened confidence levels with BDO’s Output Index dipping for the first time this year, down to 104.1. Firms can no longer rely on falling prices as input deflation tails off, with BDO’s Inflation Index moving up to 94.6 this month.

Firms’ worries mean that global concerns may soon hit employment levels. While hiring intentions remain relatively strong, BDO’s Employment Index suffered its sharpest percentage decrease since November 2011 this month, suggesting business concerns around the global economy could soon translate into reduced hiring intentions in the region.

Commenting on the findings, Andrea Bishop, audit partner and head of BDO LLP in the South West, said: “We thrive by being an outward looking economy, so to see the dynamo that is the Chinese market slowing down is clearly playing on the minds of exporters.  Our exports market is a key strength of the economy. We need to do all we can to maximise its potential in growing and re-balancing our economy as a whole.

“The Chancellor missed an opportunity to help exporters, and specifically those manufacturers that drive foreign trade, in last week’s Budget. The government must cut the tax barriers that exporters face as a priority. Introducing a VAT zero rating for suppliers to companies that export would be a good starting point.”

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