Midlands businesses optimistic despite vote to leave EU

Grant Thornton
Chris Frostwick

New research from Grant Thornton International has found that business confidence in the Midlands remained strong this quarter, despite the UK’s vote to leave the European Union, and the majority of businesses are optimistic about the year ahead.

The firm’s International Business Report, conducted in August and September, found that nearly 63% of surveyed businesses operating across the Midlands are optimistic about the economy’s outlook.

The global survey, including 500 UK based businesses, reported that business confidence in the Midlands is amongst the highest in the UK this quarter, but the report recorded a significant drop in confidence nationally compared to last quarter, with a -19-percentage point drop in net business optimism to 21%.

The confidence felt by the Midlands firms surveyed is further reflected across other indicators for the year ahead. The report found that 72.1% of locally-based businesses expect an increase in annual turnover, 64% expect to increase profitability and a total of 50% expect to increase or maintain export activity. 46.5% also expect to increase the number of employees, 23.3% expect to increase salaries by more than inflation, whilst 18% are looking to recruit specialist talent.

Growth and expansion is also on the cards across the region. Grant Thornton’s report found that 39.5% of Midlands-based businesses plan to expand their operations in the UK and 19.8% plan to expand overseas.

Despite the survey being conducted following the UK’s EU referendum vote, economic uncertainty is relatively low amongst Midlands firms, with just over 8% reporting strong concern.

Commenting on the report’s findings, Chris Frostwick, partner and practice leader of Grant Thornton in Leicester, said: “The results make for very interesting reading.  Confidence levels are clearly high, notwithstanding Brexit, and there is very much a ‘business as usual’ mentality in evidence, with our clients in the main remaining positive about the opportunities in the East Midlands”.

The survey also examined whether business leaders across the globe have put key investment decisions on hold, pending greater clarity on the UK’s future relationship with the EU. More than a fifth (22%) of UK businesses indicated they had put key decisions on hold as a result of the Brexit vote.

Frostwick added: “Given that the results of any Brexit negotiations are probably two years away, it is worrying if investment decisions are to be put on hold for that long.

“It is interesting that the report’s respondents still appear to want things that EU membership gave us – specifically access to the EU market and free movement of labour – whilst also wanting a roll-back of matters such as Working Time Directive, that were a perceived consequence of EU membership”.

When asked what areas the government should prioritise in its Brexit negotiations to support their businesses’ growth, UK respondents pointed to full access to the single market (48%); continued free movement of people across Europe (46%); a review of UK employment legislation based on EU rules for example working time directive (45%); and trade deals outside the single market (34%).