Recovery in business activity from the Covid-19 pandemic has boosted employers’ confidence to its highest level of hiring intention but increased concern over inflation, shows a new survey released today.
According to Accenture/IHS Markit UK business outlook, two-thirds (67 per cent) of UK private sector firms expect an increase in business activity over the next 12 months compared to those (11 per cent) anticipating a reduction.
And business expectations have risen to the highest level in six years.
The firms foresee an improvement in profits over the coming year due to the recovery from the Covid-19 pandemic.
The increased business optimism has pushed the firms to make plans to boost investment and employment, with a net balance of 41 per cent of companies expecting to hire more staff in the coming year.
Confidence improved the most among construction firms, following manufacturers and services firms. These sectors expected the output would bounce back to the same or higher than the pre-Covid level.
Rachel Barton, strategy and consulting lead at Accenture UK & Ireland, says: “Despite continued uncertainty, it is hugely encouraging that confidence remains high amongst British businesses.”
“The challenge for business is to invest in a way that inspires sustainable growth by hiring people with the right skills and investing in the right technologies that will deliver for the long term.”
Moreover, the latest survey found that capital expenditure and research and development plans among UK businesses have improved to the highest levels in six years.
Investment forecasts remained strong among manufacturers and service providers.
However, hotels and restaurants declined in their business optimism due to the post-reopening jump in demand to cool off, while rising costs and staff shortages have posed possible risks to growth.
Sectors include timber, metals and textiles producers recorded a drop in confidence amid the severe impact of the global supply issues.
Despite the strong forecast in output, companies reported a record high of concerns over rising workforce costs and inflation.
Some firms commented Brexit contributed to the labour shortages, and businesses planned to raise their selling prices, possibly accelerating consumer price inflation in the second half of the year.
“This overwhelmingly positive outlook is the potential for rising costs and supply chain pressures. Many businesses have used the pandemic to restructure their supply chains to bring production closer to the point of demand,” said Barton.