Plans to invest in AI help to keep UK businesses confident

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It has been clear for all to see in recent times that firms across the UK have been buffeted by a range of adverse factors, not least inflation and climbing interest rates. However, at least one recent business outlook survey has found that many of the country’s businesses continue to be optimistic.

Indeed, the digital newspaper, LondonlovesBusiness, has reported that according to one such survey, UK firms are confident in activity continuing to grow over the year to come.

The businesses questioned indicated that they planned to heighten investment, including in artificial intelligence (AI), and it seems that this is helping to offset the other concerns many companies in the UK have right now.

Greater UK business confidence than in other parts of Europe

Specifically, the net balance of UK businesses that anticipated activity levels would go up over the next 12 months was +40% in June. This was just slightly lower than the +43% recorded in February, and a long way north of the record low that had been seen in October last year, a time defined by the unfolding chaos from the then-Liz Truss Government’s “mini-Budget”.

It was also interesting to see how much more confident UK firms were about the future than their counterparts elsewhere in Europe, where the optimism reading was just +19%. This compares to a global average of +28%. In fact, Ireland was the sole country to provide a higher positivity reading than the UK.

Inflation, though, remains a struggle – especially staffing costs

In light of a recent fall in UK inflation, it is also intriguing to see businesses’ expectations for where it could be in the months ahead. The business outlook reported on by LondonlovesBusiness showed high inflation expectations with a +51% reading, although this is at least down from the +59% reading seen earlier in 2023.

This was particularly evident on the subject of staffing costs, with a net balance of +72% of firms forecasting increases in wages over the looming 12 months. Again, this is lower than the +77% reading given in February.

Given such evidence of higher costs, it won’t surprise too many of those using an accountant in Newton Abbot right now, to read that most firms are putting up their prices to offset them. A net balance of +45% of UK businesses predicted that they would increase their prices. This figure has gradually declined over the last 12 months, but continues to be three times higher than the net +15% of companies that expected a net rise in profits.

Still, expectations of UK business activity were encouragingly high, and upbeat predictions were made, too, for employment (+21%), capital expenditure (+5%), and spending on research and development (+3%). Manufacturers signalled that they intended to put up their capital expenditure (capex) spending by the biggest amount in more than a year, amid ambitions to bolster automation and heighten productivity.

The business environment is challenging, but firms seem to be warming to the task

None of the above, of course, should cause UK companies to in any way underestimate the severe challenges that are likely to remain in the economy for a long time to come. High inflation and climbing interest rates are far from a “worry of the past” just yet.

Still, it should hearten any individual or organisation drawing upon the services of an accountant in Newton Abbot, to read that a lot of firms are feeling positive about what the coming 12 months could bring for them.

To learn more about our own accountancy services at TS Partners, and the difference they could make to your business’s operations this year and beyond, please feel free to reach out to us today.