A major study has shown UK business confidence has fallen again as economic uncertainty impacts on firms’ plans for the year ahead.

However, the latest Business Confidence Monitor, collated by the Institute of Chartered Accountants in England and Wales (ICAEW) and Grant Thornton UK, reported confidence remains at a historically high level despite the results.

The study also shows that, with the Westminster General Election less than six months away, many businesses report a skills shortage and that regulatory requirements are more of a challenge now than in the run up to the last election in 2010.

Michael Crowe, a director at Grant Thornton in the Isle of Man, said: ‘It was recently reported locally that confidence in the Island’s economy has fallen compared with a year ago, and it would seem that mood is reflected among the business community in the UK, despite the signs of an economic upturn.

‘The UK is a vital market and partner for the Isle of Man, so it is vital to understand attitudes towards the economy there, and how that has impacted on the way business will be done in the future. This detailed study provides an important insight which should be extremely useful to the Island.’

The BCM assesses economic results from the first three quarters of the year, measures confidence in the current quarter and forecasts what is expected to happen to growth, profit, turnover and investment.

Among the key findings for Q4 2014, the study showed that the BCM Confidence Index stands at +28.6, down from +32.3 previous quarter. Although this represents a decline for two consecutive quarters, confidence is still relatively high, the report says.

It also shows capital investment has picked up, although is expected to fall in 2015, with turnover and profit growth stabilising, and concern about skill shortages and levels of staff turnover becoming a greater issue for businesses, highlighting a potential barrier to future growth. The Construction sector in particular is struggling with getting non-management skills.

The report also reflects that export increases have slowed markedly alongside a struggling Eurozone economy, although domestic sales have remained stronger.

ICAEW Chief Executive Michael Izza said: ‘A rebalancing of the economy was promised by the Coalition Government after the last election. The latest BCM figures show that this has not happened. Exports have been weakening, while domestic sales are much more buoyant. Capital investment expectations have also flattened and manufacturing is not as strong as it should be. With less than six months until the General Election, questions will be asked about the long term sustainability of the economic recovery and whether any real changes have been made.”

Mr Crowe added: ‘Although the BCM results reflect the positivity felt during 2014, there are signs of concern for the future. Confidence is relatively high, but the study shows businesses do have uncertainty about their prospects for the year ahead. This uncertainty is, in part, being caused by the upcoming Westminster elections as business leaders do not know for sure what the shape of the UK’s domestic future will be, nor its relationship with the EU or rest of the world.’

The report says labour market factors are a greater challenge to businesses now, compared to the run up to the last Westminster General Election. More businesses are reporting that staff turnover (10% in Q4 2009 vs 22% in Q4 2014) and the lack of availability of non-management skills (3% in Q4 2009 vs 20% in Q4 2014) are posing problems. Regulatory requirements are also a bigger factor for companies now than in the run up to the last time the UK went to the polls. The construction and business services sectors have reported the highest increase in staff numbers over the past year.

Photo - Michael Crowe.