Keith Proudfoot ICAEW Regional Director

Northern business confidence hit by high unemployment and concerns over public policy

Business confidence in the North of England has slipped back to negative territory. According to the Quarter 4 2011 ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) senior business professionals in the region recorded a Confidence Index score of -7.7, compared to a score of +4.4 last quarter.

ICAEW Regional Director Keith Proudfoot said: “Apart from a brief improvement in optimism in Q2 this year where our score reached +16.9, confidence in the region has been weakening since the middle of 2010.

He commented: “In line with weakening business confidence, firms in Northern England expect deterioration in financial performance. It appears that the continued turmoil in the eurozone is weighing down heavily on expectations for firms in Northern England.

“The labour market in the region is also a cause for concern. The latest official labour market data show that Northern England had the highest unemployment rate in the country at 11.6% over July to September 2011, up 2.6 percentage points since a year before, and compared to the national average of 8.3%.

“Despite the fact that at the beginning of November the region was allocated nearly £100m from the Regional Growth Fund (RGF) which was specifically set up to create jobs in the areas hit hardest by the public sector cuts, doubts have been expressed as to whether this is enough to offset the high rate at which public sector jobs are being lost in the region.

“There are also still concerns related to the public policy environment, with almost one in three businesses in Northern England (31%) reporting regulatory requirements to be a greater challenge than a year ago, and almost one in four (23%) saying that their tax burden poses more of a challenge.”

Joe McLean, a recovery and reorganisation partner in Grant Thornton’s North East region, said: “The extent of negative sentiment in underlying business performance indicators, with confidence dropping across the UK's regions and sectors, is worrying. Individual dynamic mid-market companies operating in niche markets continue to do well but the slump in consumer demand and the on-going crisis in the Eurozone is taking a toll.

“The question is less one of competitiveness and more about the resilience of domestic and international markets. Where they can,  businesses need to make the most of opportunities in growing Asian and BRIC economies to maintain demand and safeguard future growth while keeping a close eye on cost and efficiency.”

For further information please go to icaew.com/bcm