Ongoing economic uncertainty has led to UK businesses sharply scaling back their investment intentions, according to the latest Santander Trade Barometer research.
The research found that almost a quarter of businesses are no planning no investment at all in the year ahead. While only a third (33%) are planning to invest in new equipment – down from 68%.
Fewer businesses expect to grow over the next three years, with UK-only firms especially downbeat. Just 23% of businesses are very confident of future growth over the next three years, while 16% say they are pessimistic or very pessimistic about their growth. Those businesses aspiring to be international remain the most confident.
The potential for an economic slowdown in the UK over the next 12 months is the key driver of diminishing business confidence, cited as a concern by over half (55%) of businesses.
General anxiety about Brexit has now given way to specific concerns about supply chain links to EU countries (34%), tariffs on EU sales (31%) and reduced trade with the EU (32%).
The ability to attract and retain skilled staff also remains a significant worry for UK businesses, with 55% saying this will be one of the most important drivers of growth over the next three years – even more important than reaching a satisfactory Brexit conclusion.
“There’s no doubt businesses are worried about the UK’s uncertain economic outlook, leading many to significantly scale back their investment plans,” said John Carroll, Head of International & Transactional Banking at Santander UK.
“However, it’s important that businesses don’t lose sight of the huge potential offered by international markets to bolster their growth when faced with unpredictability at home.
“We know it’s not easy, but those bold enough to look overseas can reap the benefits.”
For those businesses considering international expansion, the US is now the most-favoured target market, though many firms do still anticipate growth in Europe.
Increasing trade outside the EU is seen as a popular contingency plan to manage uncertainty with the UK economy.
Santander’s recent analysis of the ONS top 50 goods export markets showed that the top 10 fastest growing markets in 2018 were predominantly made up of non-European Union countries.