In Focus: Don't catch the bug
Decreasing business confidence is spreading like a flu bug. Don't get caught by it, says Richard Abbott
"Everything has fallen off a cliff." That was the view of a dealmaker that I spoke to recently.
And he's not alone. Worsening fears about the eurozone debt crisis, along with a growing sense that we are heading for a second round of recession, are having a massive impact on business confidence.
Speaking at a recent Insider dealmakers round table (which you can read in full in the November issue of Insider) Nigel Ward of PwC spoke of "a very clear turndown in confidence since people came back from their summer holidays."
Paul Trickett of Deloitte said the erosion of confidence is akin to a "contagion".
"It spreads from corporate lack of confidence through advisor lack of confidence through to consumer lack of confidence. It impacts on the economy and also the appetite for deals," he said.
The dinner table talk at our Dealmakers Awards last week was of transactions that looked likely to compete before Christmas now being pushed back into the New Year as investors and business owners catch the bug.
Deloitte's latest CFO survey showed that optimism among CFOs of major UK businesses fell again in the third quarter of 2011. It found that 43 per cent of CFOs believe that the UK will fall back into recession, up from 33 per cent in the preceding quarter.
The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) Confidence Index is at its lowest level since the depths of recession in 2009. It found that turnover and profit growth expectations have declined for two successive quarters, implying sluggish growth will continue.
There are still a few weeks to go before the business world enjoys a well-earned festive break, and we need to use that time to remind each other that there are grounds for real optimism about the local economy. I'll give you two to be going on with.
Opportunities for expansion into emerging markets are top of the agenda and Yorkshire-based companies can maintain demand and safeguard future growth by focusing on these areas. Funding remains a challenge, but there are more options to explore than ever.
There is also evidence from 2011 that Yorkshire is viewed favourably by US and other international corporates, as a starting point for European expansion. They are attracted to our region by our manufacturing heritage and service quality. The strength of international trade buyers in local deals is set to continue in 2012.
The renewables sector is another reason for genuine optimism. While not all agree on the value proposition of wind energy compared to other energy sources, the government is committed. The plans for wind energy in the Humber offer myriad opportunities for manufacturing firms and support service suppliers. I'm looking forward to chairing an Insider breakfast debate on this very subject in the run-up to Christmas.
So are we falling off a cliff? That might be a touch too strong. Sure, it's challenging out there but don't catch the bug – focus on your own business and 2012 might not be quite as bad as the mood of the moment indicates.
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