2015 Q3 Business Outlook (Barbados) Analysis and Comment

Business Outlook 2015 Q3 Summary Business confidence is a unique gauge of economic activity. It is the measurement of what business owners and

executives think is going to happen in the future. Therefore, business confidence reports are one of the few

forward looking data sets available to members of the business community.

Business confidence reports therefore represent an important source of information for businesses. Because of the

uncertainty involved it is strongly recommended that a variety of information sources be utilized by both the

business community and policy makers for more effective decision-making.

ABELIAN Consulting Services, in collaboration with the Barbados Chamber of Commerce & Industry (BCCI) has set

about trying to understand confidence levels over time and developed this series of surveys. The objective is to

assist local businesses in their decision-making by understanding LOCAL data and information. Business therefore

do not have to rely on national data or the media, for information on business confidence levels.

This is the second instalment of the Business Outlook for Barbados and we wish to sincerely thank the BCCI and

other associations within the Barbados Private Sector Association (BPSA) that made this survey possible.

We wish to especially thank the many business owners and executives that took the time out of their busy

schedules to participate in the survey and answering the questions.

Conducted by ABELIAN Consulting Services

in collaboration with Barbados Chamber of Commerce & Industry

Barbados

www.abelianconsulting.com Page 2 of 13 Business Outlook 2015 Q3

SURVEY METHODOLOGY

The Business Outlook survey was designed

and executed to capture business

responses in Barbados.

The survey questions were designed with

input from the BCCI Trade and Economic

Policy Committee and ongoing feedback

from participants. This would allow for

benchmarking confidence levels on

Barbados against other countries over a

period of time.

Opening on Tuesday April 07, 2015 and

closing on Monday April 20, 2015, the survey

was distributed exclusively online via email

to a wider cross section of the business

owners and executives.

The questions were short and simple and

took on average approximately 8 minutes to

complete for most respondents.

The last question asked if the respondent

wished to leave their email address for

purposes on email alerts regarding the

release of the results. The privacy of all

respondents will be maintained at all times.

Although the survey is qualitative in nature,

the reported statistic for each question is a

single net balance number where

applicable. That is, for each question the

respondent is asked to indicate “improved”

or “increased”, “deteriorated” or

“decreased”, or “remained the same”.

Respondents are expected to extrapolate

from their own experience driven by internal

performance data when answering the

questions in the surveys whilst also taking into

consideration any relevant issues currently

affecting their industry and/or sector. The

responses are then converted into a net

balance statistic via the calculation:

𝑛𝑒𝑡 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 (%) = [(𝑖 − 𝑑)

(𝑖 + 𝑑 + 𝑟𝑡𝑠)] ∗ 100

Where 𝑖 is the number of “improved”

responses; 𝑑 is the number of “deteriorated”

responses; and 𝑟𝑡𝑠 is the number of “remain

the same” responses;

FIGURE 1: CONFIDENCE RANGE

Figure 1 shows the range of the net balance

statistic which has a minimum of -100 (0

improved and remained the same

responses) and a maximum of +100 (0

deteriorated and remained the same

responses).

Research shows a strong positive correlation

between business confidence and

economic growth. Countries with consistent

metrics on the greener end of the

confidence spectrum tend to have stronger

economic performance which is

underpinned by the robust business activity.

Very low Low Balanced Moderate High

-20 +20 +60 +100-100 -60

http://www.abelianconsulting.com/


Industry Analytics

Industry Responses Percent

Agribusiness 3 3%

Banking 2 2%

Business services 8 8%

Construction 6 6%

Consulting 4 4%

Education 0 0%

Energy 2 2%

Engineering 1 1%

Entertainment 0 0%

Financial Services 7 7%

Hospitality 3 3%

Hotel/Accommodation 3 3%

Information Systems 2 2%

Insurance 5 5%

Legal 13 12%

Leisure 1 1%

Manufacturing 21 20%

Marketing 1 1%

Media/Publishing 1 1%

Non-profit association 1 1%

Real Estate 5 5%

Retail 7 7%

Technology 2 2%

Telecommunications 1 1%

Transportation 3 3%

Wholesale 4 4%

TOTAL 211 100%

Skipped 40

The major respondents to this survey were

from the finance sector (16%) which

includes banking, insurance and financial

services executives. Manufacturing and

level professionals both represent 13% of the

respondents.

Category Responses Percent

Micro (<=10) 42 38%

Small (11-50) 38 34%

Medium (51-100) 11 10%

Large (101 or more) 20 18%

Total 111

Skipped 15

Responses from small and medium size

businesses made the majority (73%) of the

survey.

NUMBER OF RESPONDENTS

There were 126 responses to the Business

Outlook 2015 Q3 compared to 251 during

2015 Q2.

56

251

126

0

100

200

300

2015Q1 2015Q2 2015Q3

Survey Responses



General Business Confidence

Net balance (%): -28%

Confidence: LOW


Confidence: BALANCED

For the third straight quarter, respondents

generally felt more positive about general

business conditions in 12 months’ time than

in the shorter term. Whilst the percentage

who believes conditions will deteriorate is

fairly steady around 40% for all three outlook

periods, a larger number of respondents 28%

believe business conditions will improve over

the next 12 months when compared to the

next 3 months (10%).

These shorter terms metrics don’t provide

the business signals that economic growth

will likely be robust for the remainder of 2015.

As a result, business confidence levels range

from low with regards over the next 3-6

months to negatively balanced over the

next 12 months.

We are almost at the point where some

validation of the expectations for general

business conditions can be conducted. This

type of data validation could assist us with

determining how realistic the longer term

(12-month) business outlook is vis-à-vis the

shorter term (3-month). In short, we should

be able to decipher whether the forward

looking optimism is consistent with actual

business performance.

51%

40%

10%

0% 20% 40% 60% 80% 100%

Remained the same

Deteriorated

Improved

2015Q3 A1.1: With regard to the Barbados Economy, do you believe that General Business

Conditions in 3 months' time will have?

44%

42%

14%

0% 20% 40% 60% 80% 100%

Remained the same

Deteriorated

Improved



29%

43%

28%

0% 20% 40% 60% 80% 100%

Remained the same

Deteriorated

Improved





Economic Indicators


Confidence: LOW





Respondents were not very positive with

their expectations for employment as just

over two-thirds (69%) expect the

unemployment rate to increase over the

next 12 months. Overall confidence

amongst respondent for this indicator has

remained low since this survey has

commenced. There is clearly more

optimism regarding general business

conditions over the next 12 months,

however, if these sentiments hold true then

the economy is likely to experience jobless

growth.

Despite the announcement of the

liberalization of interest rates on April 7, 2015,

a majority of respondents (58%) felt that

interest rates on loans would not change in

12 months’ time. Further, some 21% indicate

an expectation that interest rates on loans

will rise, this is 7% lower than the 2015 Q2

response level. Overall, the confidence

indicator is negatively balanced.

Similarly, 52% of respondents felt that interest

rates on overdrafts will remained

unchanged in 12 months’ time. 32% also felt

that these rates on overdraft will increase.

The overall confidence indicator is therefore

characterized as negatively balanced.

20%

69%

11%

0% 20% 40% 60% 80% 100%

Remained the same

Increased

Decreased

2015Q3 A3.1: How do you expected the Unemployment Rate to have changed in 12

months' time?

58%

21%

21%

0% 20% 40% 60% 80% 100%

Remained the same

Increased

Decreased

2015Q3 A3.2: How do you expected Interest Rates on Loans to have changed in 12 months' time?

52%

32%

16%

0% 20% 40% 60% 80% 100%

Remained the same

Increased

Decreased

2015Q3 A3.3: How do you expected Interest Rates on Overdrafts to have changed in 12 months'

time?



Firm Level Confidence

Net balance (%): +8%






One-third of respondents expect their firm’s

real business activity to increase over the

next 12 months whilst nearly 41% expect this

indicator to remain the same. 1 out of every

4 respondents however expects real

business activity to decrease. The net effect

is a positively balanced confidence

indicator. This is consistent with general

business conditions indicator for the same

time period.

With respect to real profits, 1 out of every 3

respondents (34%) expects their firm’s real

profits to decrease over the next 12 months.

The confidence level for this indicator is

negatively balanced. Though it is within the

same range as the real business activity

indicator, there is a 20 percentage point

differential between indicators that may be

somewhat counterintuitive.

Firm level expectations for employment

prospects over the next 12 months are

bearish as some 26% expect their staffing

levels to be reduced. Approximately 18% of

those expecting to their firm’s employment

levels to decline in the next 12 month were

BCCI members. The negatively balanced

confidence rating for this indicator is an

improvement from the previous quarter

when the statistic was classified as low with

an estimated value of -25%. Notably, 63%

of respondents indicated their firm is

expected to maintain the same level of

employment over the next 12 months which

is a very good sign since it up 20% from 2015

Q2.

41%

25%

33%

0% 20% 40% 60% 80% 100%

Remained the same

Decreased

Increased

2015Q3 B1: With regard to Your Business, how do you expect Real Business Activity to have changed

in 12 months' time?

45%

34%

21%

0% 20% 40% 60% 80% 100%

Remained the same

Decreased

Increased

2015Q3 B2: With regard to Your Business, how do you expect Real Profits to have changed in 12

months' time?

63%

26%

12%

0% 20% 40% 60% 80% 100%

Remained the same

Decreased

Increased

2015Q3 B3: With regard to Your Business, how do you expect Employment to have changed in 12

months' time?



Firm level Confidence




Confidence: MODERATE


Confidence: LOW

There were 54 responses to the question

related to the holding of inventories over the

next 6 months. The level of confidence in

this area was both positively balanced as

shown in the chart. When asked about the

next 3 months, the over indicator was

negatively balanced (-15%). Of note

however, was that more respondents felt

their inventory levels would increase in 6

months’ time relative to in 3 months’ time.

For businesses involved in construction, there

were 16 responses. Almost 50% expected

residential construction to increase over the

next 12 months. In the previous quarter, only

22% felt there would be an increase in this

category of activity though on a larger

number of responses. The net balance

statistic for indicator was moderate which is

a good sign for the recovery of construction

activity in the country if it materializes.

In spite the deregulation of monetary policy

with respect to interest rates on deposits,

only 14% of respondents felt it would be

easier to get credit in 12 months’ time. 51%

felt it would be harder whilst 35% thought

access to credit would be the same. The

net balance statistic means that the overall

confidence level for this important indicator

is low.

37%

26%

37%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Remained the same

Decreased

Increased

2015Q3 B10: With regard to Your Business, how do you expect Inventories to have changed in 6

months' time?

38%

19%

44%

0% 20% 40% 60% 80% 100%

Remained the same

Decreased

Increased

2015Q3 B11: If your business is involved in Construction, how do you expect your Volume of

activity for Residential Building to have changed in 12 months' time?

35%

51%

14%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Remained the same

Harder

Easier

2015Q3 B13: Will it be easier or harder to get credit in 12 months' time?



Business Performance (last 6 months)



Over the last 6 months, 37% reported that

their businesses performed weaker than the

previous 6 months which has not changed

from the previous quarter. In 2015 Q2,

business performance estimates were better

than in the current quarter as more

executives indicated experiencing stronger

business performances, 26% versus only 19%

currently.

The confidence level for the current period

is negatively balanced as more firms (37%)

indicated registering a weaker performance

in the last 6 months than those that had a

better outturn (19%) when compared to the

previous 6 months.

Business Performance (next 6 months)



Over the next 6 months, more business

owners and executives expect their firms to

perform stronger than the last 6 months by a

margin of 6% compared to those that

believe their businesses will perform weaker.

In 2015 Q2 the same margin was 17%.

Compared to 36% in 2015 Q2, 27% of

respondents now anticipate an improved

business performance over the next 6

months.

This net balance statistic for this quarter is still

a positively balanced level of confidence

and perhaps represents some green shoots

of growth looking ahead. Small and micro

businesses being more optimistic in the short

term is a good signal.

Some caution must be taken as both

business performance metrics have

declined since the last quarter.

9%

28%

44%

17%

2%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Much weaker

Somewhat weaker

About the same

Somewhat stronger

Much stronger

2015Q3 C1: How has your business performed over the LAST 6 months relative to the previous 6

months?

5%

17%

52%

24%

3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Much weaker

Somewhat weaker

About the same

Somewhat stronger

Much stronger

2015Q3 C2: How do you believe your business will perform in the NEXT 6 months compared with the

last 6 months?



Major Constraints on Business

In your opinion, what are the major constraints on the growth of your business?

Respondents could select more than one answer to this question. Answer choices Responses Percentage Rank

National economic performance 85 67% 1

Rising overheads and utility costs 49 39% 2

Price pressure from customers 48 38% 3

Price pressure from competitors 41 33% 4

Problems with government

planning regulations 38 30% 5

Declining customer base 33 26% 6

Licensing and regulations 30 24% 7

Regional economic performance 29 23% 8

Global economic performance 25 20% 9

Rising production costs 24 19% 10

Increased competition from low

cost imports 22 17% 11

Difficulties in obtaining finance /

extending credit facilities 21 17% 12

Price pressure from suppliers 20 16% 13

Availability of skilled workers 17 13% 14

Rising transport costs 16 13% 15

Declining visitor numbers 12 10% 16

Broadband and information

technology access 7 6% 17

Transport infrastructure 6 5% 18

Environmental catastrophes

(hurricanes, flooding,

earthquakes etc.)

4 3% 19

Reduced demand for exports 4 3% 19

Access to training 3 2% 21

Limited supply of production

materials and/or product 2 2% 22

Shortage of commercial land 2 2% 22

Declining demand from

customers 0 0% 24



Feedback

The following is a selection of comments provided by respondents on general issues

affecting businesses in Barbados.

Increase Port Taxes, Length of time documents

are processed through Customs, Length of time

Goods are cleared from the Port. Length of

time payment is made by Debtors.

The economy need stimulating, small, medium

and large, Government seems to be interested

in only large projects.

Lack of confidence in Government policies.

Regulation, taxes and policies that are

implemented without discussion with

stakeholders i.e. solid waste tipping fee,

renewable energy regulations, changes in VAT

etc.

There needs to be greater linkages between

businesses in the agriculture and retail and

tourism businesses.

No VAT returns since 2011 while we cannot

collect VAT as we are zero rated over 300k

owed to a small agro business- and no one in

the BRA even has the decency to reply to

correspondence. Inputs for hi tech agriculture

are subject to VAT and in many cases tax

because of their specialty nature which fall

outside the Classical agricultural box. I’m

seriously viewing options to close the company

at the end of 2015.

Unchallenged accusations of serious corruption

within cabinet are harming Barbados'

reputation. It is also making many Barbadians

lose faith in the system and this is harming

longer term investment.

The current industrial relations climate is

affecting our business negatively. We depend

on imports and any negative movement in that

area affects us. This has resulted in the

company missing vital opportunities to sell

product as we can’t sell what is still in the Port.

Government contracts are the largest accounts

receivable which banks do not consider

collectible. These accounts receivables are

taken out of the bottom line when applying for

finance. Thus private companies with

Government contracts are getting slower and

slower at paying their debts as they become

cash tied. The whole system is grinding to a halt.

The BCCI needs to keep pressing the point to

Gov't that with business development &

expansion generates the tax revenue that they

so desperately need. Continual increasing of

taxes on an already overburdened society with

increasing unemployment is myopic and

unsustainable.



-16%

-10%

-7%

-25%

-20%

-15%

-10%

-5%

0%

2015 Q1 2015 Q2 2015 Q3

Business Confidence

Economic Analysis

The latest results of the Business Outlook 2015 Q3 show that businesses are still experiencing

tough times. As a result, overall economic activity continues to struggle in the face of

multiple challenges currently facing businesses. Firms are bearish about their own

employment prospects and a significant proportion view access to credit as getting harder

over the next 12 months.

Though the low response in 2015Q1 makes it difficult to deliver meaningful comparisons for

individual confidence indicators, we can still review the overall business climate with some

degree of confidence. The overall business confidence for 2015 Q3 is still negatively

balanced and estimated at -7%, compared to -16% and -10% during 2015 Q1 and 2015 Q2

respectively. Of the 21 indicators which the net balance statistic is calculated, 9 registered

positive measures of confidence which are as follows:

Real business activity in 12 months’ time (+8%)

Price of good/service in 3 months’ time (+12%)

Investment in buildings, plant and equipment in 12 months’ time (+2%)

Real exports in 12 months’ time (+26%)

Capacity Utilization in 3 months’ time (+4%)

Inventories in 6 months’ time (+11%)



Volume of activity in residential construction in 12 months’ time (+25%)

Volume of activity in non-residential construction in 12 months’ time (+12%)

Business Performance over the next 6 months (+6%)

These 4 indicators fall in the balanced category and is not sufficient to offset the negative

confidence levels of the other 17 indicators to reach positive territory overall.

Interestingly, the monetary policy announcement by the Central Bank of Barbados at the

beginning of the survey period did not appear to have any significant influence the

responses as it relates to interest rates on loans and overdrafts and the relative ease of

accessing credit in general. Only 10% expected lower interest rates on overdrafts in 12

months’ time, whilst 21% expect rates of loans to decrease. Some 86% also expected that

it’ll be harder to access credit in 12 months’ time (44%) whilst 42% expected access to

remain the same.

On the bright side, firms are much more positive and upbeat about the future, with 36% of

business owners and executives expecting stronger trading levels over the next 6 months.

Only 20% expect a weaker performance over the next 6 months. For there to be significant

growth in in the economy this year, this optimism must be translated into improvement in real

business activity which should be accompanied by the higher employment levels.

Following the presentation of the Budgetary Proposals and Financial Statement in June 2015,

there will likely be a negative impact on the cash flow of some business segments as there

will need to be an outlay of cash in order to remain tax compliant. Despite having a better

outlook over the next 12 months, shorter term challenges may well prove difficult in finding

available cash to settle new tax bills and will likely dampen new investment require to

maintain or expand business activity.



Acknowledgements

With the support of the following organizations this survey would not have been possible.

We would like to sincerely thank the following:

Barbados Agricultural Society – http://www.basonevoice.org/

Barbados Association of Retired Persons – http://www.barpbb.com/

Barbados Bankers’ Association

Barbados Chamber of Commerce & Industry – http://barbadoschamberofcommerce.com/

Barbados Coalition of Service Industries - http://bcsi.org.bb/

Barbados Employers’ Confederation– http://www.barbadosemployers.com

Barbados Hotel and Tourism Association – http://www.bhta.org/

Barbados Industrial Development Corporation – http://www.bidc.org/

Barbados International Business Association – http://www.biba.bb/

Barbados Manufacturers’ Association – http://www.bma.bb/

Barbados Small Business Association – http://www.sba.org.bb

Hoyos Publishing

Institute of Chartered Accountants of Barbados (Associate Member) – http://www.icab.bb

Miller Publishing

Legal Disclaimer

This report provides information designed to help users cope with their own business, financial, legal and

other needs. This information is not the same as retaining experts in those fields for advice. Although we go

to great lengths to ensure the information is accurate, we strongly recommend you consult an expert,

including but not limited to an economist, accountant, financial services consultant, lawyer or other

professional as appropriate. Nothing contained in this report is to be considered as the rendering of financial,

professional, legal or other advice for specific cases, and users are responsible for obtaining such advice

from their own financial, legal or other counsel. The information contained in this report is intended for

educational, background and informational purposes only.


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2015 Q3 Business Outlook (Barbados) Analysis and Comment

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