South East: Professionals concerned about crunch

The confidence index for the South East region declined from +4.3 to -9.5, a fall of 13.8 points to hit the lowest point on record for the region. Turmoil in the financial markets, substantially higher interest rates since August 2006, and a slowing housing market have caused finance professionals across sectors, regions and business size, to become pessimistic about business prospects for the coming 12 months.

Fay Deakin, President of the South East region said: “Finance professionals in the South East are among the most concerned about the housing slowdown and the economic effect of the credit crunch. In addition the region is one of the most exposed to the economic slowdown in the US. This is largely due to the proliferation of multi-national firms located in areas such as the Thames Valley, Portsmouth and Milton Keynes.”

In line with negative confidence, financial professionals in the South East predict a slowdown in the growth of turnover and profits over the next 12 months, relative to growth experienced in the past 12 months. These two variables are both seen underperforming nationwide growth by 0.7% and 0.3% respectively.

Firms in the region foresee both international and domestic demand growth slowing down through 2008. Sales within the UK are foreseen rising 5.2%, down from 5.8% growth in the past 12 months. International sales are expected to rise 2.8% down from 3.4%.

The findings also indicate that firms in the South East are planning to slow investment growth down in the next twelve months relative to the previous twelve months. This is a likely result of the increased difficulties in assessing credit. Business investment is only expected to increase by 1.4%, down from 2.1% in this past year.

Firms in the region also plan to cut jobs growth by 1.3% next year after an expansion of 1.9% reported last year. This is compared to a growth of 2% expected across the country as a whole. Salary growth is also expected to be curbed to 2.8% next year.

Considering all the regions, finance professionals believe that the tax burden is the greatest challenge for businesses in the South East. Nearly one in three (28%) in the region claim that their tax payments have become more of a challenge, compared with one in five of their colleagues nationally.