ICAEW/Grant Thornton Business Confidence Monitor Q4 2013

BUSINESS WITH CONFIDENCE icaew.com

28 October 2013

Contact: Caroline Florence

Q4 2013 ICAEW / Grant Thornton Business

Confidence Monitor results


Copyright © ICAEW 2013. All rights reserved.

Outline

• Confidence index top lines

• Financial performance indicators

– Growth indicators

– Inflation & labour market indicators

• Regional & sector stories

Source: ICAEW / Grant Thornton Q4 2011 Business Confidence Monitor


Copyright © ICAEW 2013. All rights reserved. ICAEW / Grant Thornton Q4 2013 Business Confidence Monitor Slide number 3

Business confidence continues to climb ICAEW / Grant Thornton Business Confidence Index

21.9

8.1 9.4 6.4

1.4 -1.3

-5.4

5 5.5 8.8

6.4

2.1

11.5

4.8

-3.9 -7.2

-19.7

-25.7

-36.3

-45.3

-28.2

4.8

24.6 25.8 25.5 21.5

11.9 9.6

13.7

8.1

-9.7 -9.3

12

1.1 4.2

12.8 16.7

24

31.7

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Q2 2

00

4

Q4 2

00

4

Q2 2

00

5

Q4 2

00

5

Q2 2

00

6

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

UK Average



Confidence has now been rising for five consecutive

quarters

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Q4 2

00

4

Q2 2

00

5

Q4 2

00

5

Q2 2

00

6

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

Quarterly change to Confidence Index



Confidence has been increasing since August

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40

42

THREE WEEKS BEGINNING ……..

UK BCM CI TREND - 3 WEEK ROLLED (Each point based on c.230)

Where the line passes thru 4 vertical grid boxes the change is significant.



Economic growth expected to accelerate again in Q4 2013 –

expanding by 1.3% Quarter on quarter real GDP growth, per cent

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

Q4 2

00

6

Q1 2

00

7

Q2 2

00

7

Q3 2

00

7

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

QQ growth actual

QQ growth estimate



Outline






Source: ICAEW / Grant Thornton Q4 2011 Business Confidence Monitor



Reported turnover growth and expectations pick up Turnover, annual percentage change

-4

-2

0

2

4

6

8

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

… over last 12 months … expected next 12 months



Reported profit growth has also increased this quarter Gross profits, annual percentage change

-4

-2

0

2

4

6

8

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3




Expected domestic sales growth has increased for five

consecutive quarters Domestic sales, annual percentage change

-4

-2

0

2

4

6

8

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3




Next year should see a relatively favourable environment

for UK exporters Annual real GDP growth. Cebr forecasts for 2013 and 2014

-5

-3

-1

1

3

5

7

9

11

13

15

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3f

201

4f

US Eurozone China



Reported export growth has increased for two consecutive

quarters

-4

-2

0

2

4

6

8

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3


Exports, annual percentage change



-4

-3

-2

-1

0

1

2

3

4

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3


Signs starting to emerge that businesses are becoming

more willing to invest Capital investment, annual percentage change



Sharp fall in the share of businesses reporting customer

demand to be a greater challenge Share of businesses reporting customer demand as greater challenge

0%

10%

20%

30%

40%

50%

60%

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3



Decline in net share of businesses with stocks above

normal levels Net share* of businesses** with stock levels above normal

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Raw materials Finished goods *Share of businesses with stock levels above normal minus

share of businesses with stock levels below normal ** Manufacturing, Construction,

Transport & Storage



Still signs of spare capacity in the economy Share of businesses operating at and below capacity

30%

35%

40%

45%

50%

55%

60%

65%

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Below capacity At capacity



Outline








Uptick in selling price increases but growth remains below

pre-crisis norms

-1

-0.5

0

0.5

1

1.5

2

2.5

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3


Selling prices, annual % change



Input price inflation continues to hold steady

-1

0

1

2

3

4

5

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3


Input prices, annual % change



Employment growth rising and expected to pick up further Employment, annual percentage change

-3

-2

-1

0

1

2

3

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3




FTSE 350 companies expected to stop shedding jobs Employment, annual percentage change

-3

-2

-1

0

1

2

3

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Exp

ec

ted

12 m

on

ths

fro

m Q

4 2

01

3

FTSE 350 Listed Large Private Companies SME Private Companies



Staff turnover and skill availability becoming more of an

issue as the economy recovers Net percentage balance of firms reporting factors to be a greater challenge to

business performance

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Q4 2

00

7

Q1 2

00

8

Q2 2

00

8

Q3 2

00

8

Q4 2

00

8

Q1 2

00

9

Q2 2

00

9

Q3 2

00

9

Q4 2

00

9

Q1 2

01

0

Q2 2

01

0

Q3 2

01

0

Q4 2

01

0

Q1 2

01

1

Q2 2

01

1

Q3 2

01

1

Q4 2

01

1

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Availability of management skills Availability of non-management skills Staff turnover



Salary growth remains weak and below consumer price

inflation Average total salary, annual percentage change

-2

-1

0

1

2

3

4

5

6

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

… over last 12 months … expected next 12 months Consumer price index (CPI) inflation



Outline








Trend of Business Confidence by Region

-5

0

5

10

15

20

25

30

35

40

45UK AVERAGE London

South East (exclLondon) South West East of England East Midlands West Midlands

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-5

0

5

10

15

20

25

30

35

40

45UK AVERAGE North West

NorthernEngland Yorks & Humber England Scotland Wales



Trend of Business Confidence by Sector

-5

0

5

10

15

20

25

30

35

40

45UK

ALLPRODUCTION

Energy, Water &Mining

Manufacturing& Engineering CONSTRUCTION

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-5

0

5

10

15

20

25

30

35

40

45

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance

& Insurance PropertyBusinessServices

IT &Communications



A broad-based recovery ICAEW / Grant Thornton Business Confidence Index – construction sector

-60

-40

-20

0

20

40

60

Q4 2

00

6

Q2 2

00

7

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

All Production industries Construction All Service industries



Confidence of retail & wholesale firms now

keeping pace with business services

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Q4 2

00

7

Q2 2

00

8

Q4 2

00

8

Q2 2

00

9

Q4 2

00

9

Q2 2

01

0

Q4 2

01

0

Q2 2

01

1

Q4 2

01

1

Q2 2

01

2

Q4 2

01

2

Q2 2

01

3

Q4 2

01

3

Retail & Wholesale Business services



Services sector output is now past its pre-crisis

peak ONS index of economic output, by sector, 2007 = 100

80

85

90

95

100

105

200

6 Q

3

200

7 Q

1

200

7 Q

3

200

8 Q

1

200

8 Q

3

200

9 Q

1

200

9 Q

3

201

0 Q

1

201

0 Q

3

201

1 Q

1

201

1 Q

3

201

2 Q

1

201

2 Q

3

201

3 Q

1

201

3 Q

3

Production industries Construction Services



Profit growth – last 12 months

-2

-1

0

1

2

3

4

5

6UK

ALLPRODUCTION



Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2

-1

0

1

2

3

4

5

6

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Profit growth – next 12 months

-2

-1

0

1

2

3

4

5

6

7

8UK

ALLPRODUCTION



Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2

-1

0

1

2

3

4

5

6

7

8

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Capital investment growth – last 12 months

-2

-1

0

1

2

3

4

5

6UK

ALLPRODUCTION



Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2

-1

0

1

2

3

4

5

6

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Capital investment growth – next 12 months

-2

-1

0

1

2

3

4

5

6UK

ALLPRODUCTION



Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2

-1

0

1

2

3

4

5

6

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Export growth – last 12 months

-2-10123456789

UKALL

PRODUCTIONEnergy, Water &

MiningManufacturing& Engineering CONSTRUCTION

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2-10123456789

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Export growth – next 12 months

-2

-1

0

1

2

3

4

5

6

7UK

ALLPRODUCTION



Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

-2

-1

0

1

2

3

4

5

6

7

ALLSERVICES

Retail& Wholesale

Transport& Storage

Banking,Finance


IT &Communications



Employee growth – last 12 months

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0

Banking, Finance & Insurance

IT & Communications

All Service Industries

Manufacturing & Engineering

UK National Average

Retail & Wholesale

All Production Industries

Property

Construction

Transport & Storage

Business Services

Energy, Water & Mining



Employee growth – next 12 months

-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5

Banking, Finance & Insurance

Transport & Storage

Energy, Water & Mining

All Production Industries

Manufacturing & Engineering

All Service Industries

UK National Average

Construction

Retail & Wholesale

Property

Business Services

IT & Communications



Trend of Business Confidence by Company

Type

-10

0

10

20

30

40

UK ConfidenceIndex ALL UK LISTED FTSE 350

ALL PRIVATECOMPANIES

Private CompaniesLarge (250+ staff)

Private CompaniesSME (<250 staff)

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013



Conclusions • Business confidence continued to rise in Q4 2013, suggesting that the

economic recovery is gaining further momentum.

• Confidence has now increased for five consecutive quarters.

• Financial performance indicators such as reported turnover and profit

growth have picked up and are expected to grow faster over the next

12 months.

• Tentative signs are emerging that businesses are becoming more

inclined to invest.

• Pay restraint remains the order of the day, with expected growth in

employee earnings standing below current rates of consumer price

inflation.

• Confidence has increased across all three main broad industry

sectors – Construction, Production Industries and Services.

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