Businesses lack confidence to invest effectively
THE UK is facing yet another year of sluggish growth in 2024, having only narrowly avoided recession last year. Businesses across Yorkshire and the Humber need reassurance that the economy will stabilise and that demand will pick up.
As it stands, businesses head into 2024 lacking the certainty and confidence required to invest effectively, with the CBI’s own forecast predicting business investment will fall by 5 per cent this year.
The latest data for retailers and manufacturers tells a clear story – the economy remains stuck in first gear with weak demand at its core. And it’s pretty stark.
More than half of manufacturers say they are holding back investment due to uncertainty over demand conditions – the highest level since January 2021.
On the retail front, things aren’t much better, as softening consumer demand pulls down sales.
For retailers that have navigated a series of challenges in recent years, the combination of weak demand and high costs – as they grapple with higher business rates andariseintheNationalLiving Wage – is hitting particularly hard.
There are, however, some signs of encouragement. Across the world central banks are poised to make 2024 the year of interest rate cuts.
The Bank of England certainly looks like it has come to the end of its rate-hiking cycle. That should alleviate some of the pressure of borrowing costs on hard-pressed households and businesses.
But we’re not out of the woods just yet. Inflation rising to 4 per cent over Christmas caught many by surprise and provided a timely reminder against complacency. The CBI’s own forecast suggests that inflation will come down, but still stay above the Bank of England’s 2 per cent target over the coming year.
We also need to consider new and emerging risks, like tensions in the Middle East and disruption to shipping activity impacting global supply chains.
Investment is an area that requires close attention. That’s why it’s so important for businesses and political leaders, nationally and across Yorkshire and the Humber, to work together to identify and overcome barriers.
The announcement of permanent full capital expensing in November’s Autumn Statement was widely welcomed as a way to turbo-charge lagging business investment and we look forward to seeing that have a tangible impact on future investment cycles.
That takes us to the Spring Budget and the opportunity it provides to go further and faster in our quest for sustainable growth.
Businesses are looking to Government to take further steps to address acute labour shortages, focus on making our business environment more competitiveandinvestmeaningfully in high-growth industries.
For businesses and consumers alike, it’s time for a sustainable vision for the economy that we can all get behind. One that makes us more competitive, sustainable and resilient in the long term and drives investment and demand now.
As we head into a General Election, political parties need to look beyond political short-termism to kickstart business and consumer confidence placing the UK economy on the path of long-term sustainable growth.
Olga Watterich is CBI deputy regional director for Yorkshire and Humber.