Gloomy economic forecasts fail to dampen mood for East of England businesses

Despite gloomy economic forecasts, business leaders in the East of England are optimistic about their growth opportunities for the year ahead.

According to data from Grant Thornton UK LLP’s latest Business Outlook Tracker*, mid-market optimism in the East of England has rebounded across all indicators monitored:

Revenue growth expectations have risen +37 percentage points (pp) since October

Economic optimism has risen +35pp since October

Profit growth expectations are rising – increasing +17pp since October

The results indicate that businesses are confident they can weather this economic downturn. Optimism regarding their funding position has risen +39pp since October. Over half (62%) are also confident that they have sufficient working capital to manage the impact of a recession for six months or more.

The top concerns for the region’s mid-market heading into 2023 are winter blackouts, geopolitical tensions and the rising tax burden, all of which they feel sufficiently prepared to manage.

The mid-market continues to struggle to attract and retain talent, with 65% of respondents experiencing unusually high attrition rates. Over half (60%) are also struggling to recruit for open roles.

But employers are pulling out all the stops in a bid to remain competitive. Just under three quarters of respondents (73%) are planning to offer their people a pay rise in line with, or above, inflation, while 90% are also reviewing their employee benefits package to make it more competitive. Almost half (46%) are planning to invest more in skills development over the next six months.

The research also finds that the mid-market is starting to look for ways to reduce its reliance on people, with over two thirds (67%) agree that they are increasing their use of automation and digital.

James Brown, Partner and Practice Leader at Grant Thornton UK LLP in the East of England, said: “It is surprising that the market’s positivity levels are at odds with the forecasts from the Bank of England and the government. Optimism levels have rebounded significantly since October, when the shock and uncertainty from the mini-Budget plummeted mid-market optimism to some of the lowest recorded in our Tracker. The certainty provided since seems to have reassured the market.

“Even though we know the economy and operating conditions are not likely to improve much in the short term, it is perhaps better to have bad news over uncertainty. Certainty over the future allows businesses to work this into their forecasts and take action to soften the impact.

“While a potential recession is often in the headlines, our survey shows that the labour market remains a concern. Employers are trying to improve efficiency and productivity, while also managing cost levels, which is demonstrated by high investments in technology and people. It is interesting to note the focus on skills development, which shows a commitment to making staff more efficient as well as a desire to manage retention levels and costs.

“Having seen first-hand how our region responded to the challenges of recent years with determination, flexibility, enterprise and innovation, I am confident that businesses in the East of England will find a way to survive and thrive during the months ahead. Given the encouragingly high optimism levels, it would seem that the local market shares this confidence.”