Business confidence rose above its pre-pandemic average for the first time in two years, a new survey shows, but levels of investment remained subdued in a sign that the recovery remains “brittle”.
Business confidence tripled to 14.4 in the first quarter of 2024, up from just 4.2 in the final quarter of last year, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
Although firms in the banking, finance and insurance sectors lead the way, confidence was in positive territory among every sector of the economy.
Surging confidence likely reflected stronger domestic demand, lower inflation and expected falls in interest rates. All of these factors have contributed to a modest rebound for the UK economy in the first quarter of 2024.
The UK economy has recorded growth in both January and February, making it overwhelmingly likely that last year’s shallow recession is already over.
S&P’s closely watched PMI survey, released yesterday, suggests activity actually accelerated in April, rising to its highest level in 11 months thanks to strength in the services sector.
However, despite the distinct boost in confidence, companies remain downbeat about their investment plans for the year ahead, ICAEW noted.
Companies plan to increase investment by just 1.6 per cent over the next 12 months, below the historical average of two per cent.
“The persistent weakness in investment intentions suggests that underlying economic conditions are still brittle, with weak productivity and persistent supply side constraints likely to continue limiting our economy’s ability to grow,” Suren Thiru, ICAEW Economics Director, said.
Alan Vallance, chief executive of the ICAEW, said further momentum could be “thwarted by businesses’ lack of ambition”.
“The UK economy is less resilient than it should be, leaving it vulnerable to shocks and less agile to embracing innovation,” he said.
The survey also noted that firms were increasingly feeling the burden of regulation. Some 41 per cent of firms said they were troubled by regulatory requirements, the highest level in nearly four years.
Respondents cited concerns over increased scrutiny. reporting requirements, and a perceived greater administrative burden.