Manufacturing sector is “driving force” behind UK business confidence

The UK’s manufacturing sector is thought to be the “primary driving force” behind business confidence, according to the results of the UK’s latest quarterly Credit Managers’ Index (CMI).

The index found that there was a reduction in market volatility, while overall confidence and business growth in both manufacturing and services remaining high. Manufacturing closed at an all-time high of 62.7 – after increasing by 1.5 – representing a 3.7-point year-on-year rise and the second quarter of improvement in a row.

However, the CMI’s headline figure declined by 0.6 points to 59.2, primarily due to a 1.6-point drop in the services sector to 57.5. Despite the decline, the results are broadly flat, with the headline figure remaining above a 59.0-point threshold for only the seventh time in the index’s history.

Scotland (50.8) was the only region where confidence fell below the desired 52-point threshold, while London remained steady (55.9) and seven regions reported confidence levels above 60 – an increase from just one in Q4 2016. Northern Ireland closed the quarter at 68.3 points, after falling below the 52-point threshold in Q4 2016.

By sector, banks and basic resources both had confidence levels that closed under 40 points, while telecoms, retail, travel and leisure all reported results of 50. A total of 14 sectors reported positive results above 52, with healthcare achieving the highest confidence level of 70.

The survey also found that 49% of those surveyed were using intelligence tools to identify risk against a strategy of extending credit terms to encourage growth. Just 9.4% claimed to be taking a conservative approach to credit management, while 31% said they were more vigilant than they were during the recession, 57% were about the same and 12% thought the pressure had lessened.

Philip King, chief executive of the CICM, said: “Reducing financial volatility does not mean credit professionals should let their guards down and increased vigilance in credit and cashflow is of increasing importance.

“This is especially so with negotiations for Brexit and the upcoming general election, which could, and probably will, see increasing currency fluctuations that affect our businesses in a variety of different ways.”

Michael Feldwick, head of UK and Ireland at Tinubu Square, added: “The current economic climate is very uncertain and credit managers are clearly turning to technology to help them make informed choices based on current intelligence.

“This helps them not only to have a clear understanding of the actual economic landscape and how it might impact on their business processes, but to build vital agility into their everyday decision making process.”