TT184: Business Confidence Growing

Feeling better? The evidence from our latest client survey suggests that whilst business confidence is improving, it’s a patchy picture when it comes to actual sales and real investment.

It is also clear that despite continuing debate about the ethics of tax avoidance, a clear majority – 60 per cent – take a robust and practical view about the issue and believe it is fine to avoid tax.

Those most enthusiastic for minimising tax bills are involved in the construction industry, which probably reflects their particularly tough times. More that three-quarters of respondents in that sector believe that to avoid tax is appropriate compared with just 25 per cent in the more buoyant and confident technology arena.

On the positive side across key sectors we cover, an actual and anticipated reduction in sales identified in September last year has been reversed. But neither has risen to reach the recent the peaks of March 2012, when a wind of optimism seem to be blowing more strongly.

The steady confidence about employment has remained, echoing the evidence nationally of a fall in jobless numbers.

But there is a confusing signal about capital expenditure, which is in some regards a truer measure of economic health: Confidence is high, but there is a clear division over whether to commit to increase spending now

It seems that feeling confident and having hard evidence to justify the mood are not always the same. So, although confidence about sales has grown since our last poll to stand as the view of 80 per cent of respondents, actual sales have either declined or shown no improvement according to more than 50 per cent.

There is also substantial variance between the confidence felt by different sectors at hopes of adding employees, with technology the most optimistic despite a decline in sales, and agriculture the least.

Agricultural businesses also reported the biggest drop in sales over the past six months.

Manufacturing was positive in every area: confident about sales, rising employment and capital expenditure. Both the professional and retail sectors have seen a sales increase and anticipate more, but also expect their head counts to fall.

The retail sector is most optimistic about future sales, but has endured a drop in actual sales. It also anticipates a decline in employee numbers and capital expenditure.

Transport experienced the greatest improvement in sales this time and overall this sector remains position. The wholesale sector is relatively neutral despite a small decline in sales.

Overall, a complex picture has emerged, and we are plainly not out of the woods yet. Optimism and more jobs are good boxes to tick, but the weaker confidence in capital investment and evidence of poor sales casts a long shadow.

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