Lack of confidence cost the UK 2.2bn in 2016
Low levels of business confidence in 2016 could have cost the UK £2.2bn in investment and 249,000 jobs according to new research from Newable.
The latest figures suggest that, had confidence been at the same level as the long term average (recorded between 1972-2015), the UK would have enjoyed a better business year.
Working in partnership with the Centre for Economic and Business Research (Cebr), Newable today launches the results from its “Gross Domestic Confidence” report which reveals that business confidence is not just a by-product of economic performance, but it is an indicator of, and a contributor to, future economic performance.
The new research highlights how the turbulence of 2016 directly impacted the UK’s economic output by negatively influencing business confidence. 2016 was a year of major political and economic uncertainty, brought on by a number of main events including the EU Referendum, the migrant crisis and the US presidential election. The research shows a sharp fall in confidence in the summer following the Brexit vote.
Other key findings
- Sharp fall in confidence in the summer of 2016 following the Brexit vote
- There is a 65% correlation between business confidence and employment growth, with a 2 quarter lag
- There is a 56% correlation between business confidence and business investment with a 2 quarter lag
- The research found that confidence plays a less significant role in other factors such as determining B2B and R&D spend
Chris Manson, CEO of Newable, said:
“Intuitively, we know that confidence underpins commerce; it is what keeps customers buying, suppliers supplying, funders financing and employees working. Our research for the first time highlights that business confidence has a direct and tangible impact of the health of our economy. If our businesses aren’t feeling confident, we aren’t creating jobs or attracting investment. As a nation, we should be supporting businesses of all sizes to help give them the confidence they need to operate at the highest levels and ultimately, attract as much investment to the UK as possible.”
“Moving forward into 2017 it is essential that it is not only the private sector that needs to support confidence, there is a huge role for the Government to play in helping to reduce uncertainty and install confidence within our businesses. Businesses need support in everything from finance to property, to importing and exporting; addressing all the key areas will help boost confidence, even in these very uncertain times.”
Newable partnered with the Centre for Economic and Business Research (Cebr) to quantify the impact of business confidence on the UK economy. Data was taken from the long-established CBI Business Optimism Index, and it was compared to the data from the UK Government’s Office for National Statistics (ONS) then applying controls to identify the influence of other factors such as interest rates and GDP.