Business confidence trails consumer confidence amid Brexit fears

June 15, 2016, 5:00 AM GMT+0

Concerns about Britain leaving the EU are spooking businesses more than consumers

New figures from YouGov and Cebr show that business confidence lags behind consumer confidence, amid a high degree of economic uncertainty.

Findings from the first YouGov/Cebr UK Economic Index (UKEI), a new detailed quarterly report into the economic views of both businesses and consumers, show that concern hangs over businesses, driven at least in part by fear of the UK leaving the European Union. Consumers, on the other hand, are in a holding pattern as they wait to see what happens to the economy.

Consequently, the latest data from YouGov/Cebr shows business confidence is 2.3% lower than the consumer confidence, standing at 111.0 compared with 113.6.

UKEI is a unique proposition that provides a detailed analysis of how two vital groups – businesses and consumers – view the economy. Since the financial crisis and subsequent period of fragile growth it has been more vital than ever for organisations to know what businesses and consumers are thinking and how they are acting and the quarterly report will allow them to gain this insight.

YouGov and Cebr’s research finds that uncertainty over the future of the economy has led to fewer organisations making major capital investments over the next 12 months than have done over the past year. Furthermore, a plurality of businesses are not optimistic about the shape of the economy over the coming 12 months and both of these factors point to a continued loss of economic momentum over the coming year.

As well as uncertainty over future membership of the EU, businesses are concerned about a range of other fundamental issues. One in five (19%) companies said the main challenge facing their business over the next year was either a weak domestic (13%) or global economy (6%). YouGov and Cebr found that businesses other leading concerns about the future were competition (13%) and regulation (11%).

Meanwhile, consumer confidence continues to be in a holding pattern, as it has been for most of the past year. Living standards are being supported by very low inflation and rising earnings, leaving households more confident than businesses.

Scott Corfe, Director at Cebr, says: “Businesses face a challenging environment at the moment. Even without the uncertainty created by the referendum on EU membership, businesses perceive a general loss of momentum in the UK economy which is undermining confidence. In addition, intense competition is squeezing profit margins across a range of industries. This leaves businesses less optimistic than consumers, who are enjoying a rebound in living standards as inflation remains unusually low – quite an unusual divergence in trends between companies and households.”

Stephen Harmston, Head of YouGov Reports: “Since the financial crisis consumers have become pretty well attuned about how broader economic changes affect their lives. Despite the ongoing uncertainty in the financial markets around Britain leaving the EU means UK consumers are holding tight – unsure about how things will play out over the coming year. Things could change quite quickly, though. Should the domestic economy falter – either because of weak growth or Brexit – it is likely that consumer confidence will start to drop.”

For the report, YouGov spoke with over 1,500 business decision-makers over the past three months with respondents representing a diverse range of sectors and business sizes. In addition YouGov undertook 18,000 consumer interviews over this time period.

Overall business confidence is based on backward and forward-looking measures covering organisations’ capital investment plans, exports, domestic sales, optimism in the economy, and optimism in the performance of own business. The consumer confidence metric is formulated on backward and forward looking measures across four areas – household finances, house values, job security and business activity in the workplace.

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