With business confidence across all UK industries skyrocketing, an increasing number of firms are channelling capital into growth and there are as yet no signs of this slowing in the near future. In fact, accountancy body The ICAEW is now predicting that overall business investment this year will double the rates set last year, marking the highest levels since before the financial crisis struck in 2008.
According to the body’s latest growth forecast, the record high business confidence of this quarter has allowed analysts to push growth predictions from 3.3 per cent to 3.4 per cent. As a result, GDP growth is expected to double from last year’s 1.7 per cent rate, hugely stabilising the UK’s economy and cementing Britain’s position as a centre for business excellence.
The ICAEW’s chief executive Michael Izza believes these results could persuade British consumers that the ongoing recovery is in fact very well rounded.
He says; “Unemployment is falling, and wages are keeping pace with inflation for the first time in years, so there is much to be happy about.
“Business investment is also rocketing, albeit from a low base, which will allay fears that the recovery is wholly based on consumer spending.”
The ICAEW, in addition, predicts that growth in business investment will far surpass previous forecasts, and has thus upgraded its expectations from 7.1 per cent growth to 8.2 per cent. This follows on from a report by the Office for National Statistics (ONS) which showed that manufacturing output has risen for its fastest annual pace in three years, lending further confidence to businesses within the sector and encouraging further investment into commercial property expansions.
Manufacturing has, indeed, proven itself to be one of the most significant contributors to not only economic growth but also to business investment in the UK. In the past few months alone, firms such as Cadbury’s, Bentley, Jaguar Land Rover and Screwfix – among others – have all announced large scale investments into commercial property acquisition or expansion.
Unfortunately, although the report is largely positive, there remain a few points that should bring manufacturers back down to earth with a bump. Domestic sales remain the key sources of growth for UK firms, with exports still struggling to recover due to uncertainties within economies in the Eurozone, and in addition there is a growing concern that nationwide skills shortages could prove to be a strong inhibitor to growth in the coming months – again, something which will likely affect firms in the West Midlands primarily.
Mr Izza continues; “Domestic sales are still outstripping our exports, and the rebalancing of the economy that is so often talked about could turn out to be a myth if that continues.”
The question, then, is how the UK can focus upon rectifying these issues before firms begin to look elsewhere for growth opportunities. Not only would this risk the country’s reputation, but could even destabilise local economies which have fought hard for growth during the past few years.
