Business confidence rises despite external threats

Confidence among British businesses – in particular, those with international exposure – has grown over the last three months, although businesses remain anxious about the threats posed by a sluggish domestic economy and Brexit negotiations.

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These are among the findings from the summer edition of the quarterly Santander Trade Barometer, which reveals that almost three-quarters (73%) of UK businesses are confident they will grow over the next three years, up from the 65% recorded when the survey was last carried out.

Brexit plans taking shape

When asked which external factors are likely to negatively impact their businesses over the next 12 months, 43% of companies pointed to Brexit, up from 41% in the previous quarter. Similarly, the latest results show that 43% of businesses said they were concerned about the potential effects of an economic slowdown in the UK.

Businesses are stepping up their efforts to mitigate any negative consequences of Britain’s exit from the EU, the Barometer reveals: half (51%) have started implementing plans to deal with Brexit, up from 44% in the last survey. Businesses have already implemented significant changes such as decreasing investment and mitigating risk. 32% have already set up non-sterling bank accounts to facilitate international trade and mitigate currency risk. Companies also report reduced or frozen headcount (28%), reduced overheads (24%) and increased trade with markets outside the EU (also 24%).

Aspiring international businesses more optimistic and successful

The Barometer has consistently highlighted significant differences in confidence levels and business strategy between companies that are domestic, international or aiming to go international over the next 12 months. Confidence is highest among businesses which plan to enter overseas markets in the next 12 months, with 83% of such companies confident of growth over the next three years.

Meanwhile, among those businesses which already trade internationally, 61% said their performance had improved over the past year: among companies which have no intention to operate overseas, this figure is just 50%.

The research also suggests more businesses are planning to take advantage of international opportunities, possibly to help reduce the risk of a domestic slowdown. The latest Barometer found that 66% of businesses plan to expand abroad over the coming year, up from 59% in the last quarter.

Recognising international exposure

The research demonstrates the extent to which the majority of companies – even the 30% of businesses which consider themselves ‘domestic-only’ – have international exposure. For example, half of all companies (50%) purchase goods or services from outside the UK, while 46% have customers based abroad. In fact, only 9% of the businesses surveyed for the latest Barometer say they are truly domestic and have no links at all with companies or customers based in overseas markets.

Read more about the Santander Trade Barometer.

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