ICAEW.com works better with JavaScript enabled.

ICAEW Business Confidence Monitor (BCM): North West

Q2 2019: Muted sales growth and labour market concerns hindering business sentiment

Company confidence has weakened further still in Q2 2019. Businesses are seeing markedly slower growth in exports and this, in turn, appears to be impeding profits. As well as this, businesses are reporting labour market concerns. Weak sentiment is also revealing itself through their investment plans for the year ahead, with moderations forecast across all forms of spending. 

Business confidence trend in North West

Business confidence in the North West has fallen further in Q2 2019, to -21.3. This is the lowest Confidence Index recorded in the region for a decade.  

Domestic sales and exports

Aside from Brexit, the weakness in overall sentiment may be stemming from subdued sales growth. Domestic sales are rising by a more modest 3.2% in Q2 2019, compared to 4.4% a year ago. A similar story is apparent for exports, which are increasing by just 1.9% in the year to Q2 2019, among the lowest rates in the UK and the slowest pace recorded in the region since Q4 2016. 


Slower increases in sales are hindering profits growth. In Q2 2019, profits are increasing by 2.8% year-on-year, in comparison with 4.0% in the 12 months to Q2 2018. This represents the weakest growth in three years. 

Business challenges

Another reason for low business confidence may be increasing challenges within the regional labour market. The percentages of businesses reporting growing concerns over the availability of management and non-management skills are rising, from 17% and 22% respectively in Q2 2018, to 23% and 28% in Q2 2019. Probably in consequence, businesses have increased total wages by 2.7%, a faster pace than the 1.7% of a year ago. 


Despite slowing sales and profits, growth across all forms of investment remains broadly similar to that of a year ago. Staff development and capital investment are both rising by 2.7%, rates which outpace their respective national averages of 1.8% and 2.0%. 

Prospects for the next 12 months

In the next 12 months, businesses foresee improvements in domestic sales and exports growth, to 4.1% and 3.0% respectively. Profits are also set to expand at the marginally stronger rate of 3.0%.

However, companies do not have similarly strong intentions for investment growth, with moderations expected across all forms. Growth in staff development budgets is set to weaken to 2.0%, while businesses plan to increase capital investment at the slower pace of 1.8%.  

These slowdowns are likely to reflect, in part, the weakness in business confidence, and decisions to invest are probably also being impacted by widespread spare capacity in the region. The high proportion of businesses (60%) operating below capacity reduces the scale of investment that businesses need to undertake, in order to meet the stronger sales growth that they are expecting.