Vaccine success boosts UK business confidence

Optimism among UK business leaders is at its highest level since 2015, mainly on the back of the successful rollout of the Covid-19 vaccine programme and with lockdown restrictions due to ease over the coming weeks.

According to the Accenture/IHS Markit 'UK Business Outlook', more than six times as many private sector firms (68 per cent) expect an increase in business activity over the next 12 months compared to those anticipating a reduction (11 per cent).Publication of the report coincided with a survey of more than 300 manufacturers by Make UK and business advisory group BDO showing that the industry is "beginning to move through the gears as growth prospects become more positive for the rest of the year".The Accenture/IHS report also found that a net balance of UK firms - the highest percentage in five years - were now anticipating an improvement in profits.Much of the increased optimism was down to sentiment in the service sector, where the net positive balance had increased from 32 per cent six months ago to 56 per cent in February.Rachel Barton, strategy and consulting lead at Accenture UK & Ireland, said: “After a tough year it is encouraging to see business confidence bouncing back. Although we are not out of the woods yet, it is important for UK business to take advantage of this confidence in order to build a sustainable recovery.“Change is a constant factor at the moment, but a positive mindset can be a self-fulfilling prophecy so, hopefully, companies will follow through on the investment and growth plans we see in this survey to take us through the economic downturn.”Meanwhile, the survey by Make UK and BDO led to the manufacturers' organisation upgrading its growth forecast for 2021 from 2.7 per cent to 3.9 per cent.The survey found that output volumes and domestic orders have improved this year, although export volumes are down, mainly because the UK and EU have yet to settle into the new, post-Brexit trading arrangements.Make UK said the effects of the pandemic had been "brutal" and had led to a ten per cent fall in output last year. This year - as the Accenture/IHS Markit report found - sentiment had surged thanks to the success of the vaccine rollout.
Accenture/IHS Markit report found - sentiment had surged thanks to the success of the vaccine rollout.Stephen Phipson, CEO of Make UK, said: "With investment intentions remaining in negative territory, the chancellor’s recently announced super-deduction tax incentive presents a real opportunity for those manufacturing firms with access to finance to bring forward investment plans into the qualifying period and boost their productivity."However, the proposed two-year window is arguably too short. What manufacturers really need is certainty over the longer term to allow the sector to confidently invest over a 10-15 year horizon."While the results of this quarter’s survey are encouraging, the next 6-9 months will nevertheless be critical for those manufacturers facing financial distress. Many will have deferred tax payments and taken on additional loans to help them through the crisis."The recently announced extension of the furlough scheme and other support measures will help in the short term, however, many will need to use this time to plan and implement turnaround strategies - and in certain cases take some tough decisions."

Read more news and views from David Sapsted.

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