THE business services sector remains one of the standout performers of the UK economy, but firms need the confidence to invest to retain their competitive edge.
The Quarterly Economic Survey is our regular monitor of business sentiment. One of the core measures we seek to collect through the survey is business confidence, essentially, how optimistic our member firms are for the future.
Around the time of the referendum result business confidence was significantly below trend, with our average confidence figure actually negative across 2016.
Since the start of 2017 however, confidence stabilised, with one of the highest figures on record observed in the third quarter of 2018. Although firms would report their frustration at the lack of resolution around the Brexit process, confidence was steady.
However, with uncertainty mounting as the planned exit date drew nearer, amplified by the effects of a slowing global economy, the figures began to decline once more. This has resulted in our latest optimism figure being the lowest since the fourth quarter of 2016, and once again below the average for the sector.
While this weakening optimism doesn’t yet appear to be fully reflected in sales figures, unfortunately not all metrics have been as resilient.
It’s concerning that both total and capital investment levels are at their lowest since 2017 and below long-term trends. Expectations for further investment in the year have also weakened, softening by about five percentage points from the average observed since the vote, and about 10 percentage points from the same period last year.
One area where investment has remained strong is in staff training. Although this is of course a positive, our concern is that this partly reflects the high levels of recruitment difficulties reported by our members, which are amplified by the record employment rates we’ve observed in recent times.
So fundamentally, we’re seeing a sector which is relatively resilient but struggling to find the confidence necessary to invest in the technology and capital which will keep our economy competitive into the future. Alongside this, finding the right skills continues to be a real challenge.
This points to the necessity of getting some real clarity on Brexit and the future direction of our international relationships.
Russell Borthwick is the chief executive of Aberdeen & Grampian Chamber of Commerce
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