Companies in the region are also increasingly challenged by staffing problems, particularly the availability of non-management skills and turnover. These issues appear to be hampering investment, with expected growth for the year ahead notably subdued.
Confidence has continued to weaken in Q1 2019, standing at -27, below the UK average of -16.4. This is around the level last seen in Q2 2009 when the UK economy was still in recession. Ongoing Brexit uncertainty is no doubt part of the explanation.
ICAEW East of England director Harpreet Panesar said: “Companies in the region at the moment are unclear about the future. Directors have the exceptionally difficult task of explaining within their annual reports the impact Brexit might have on their business models and operations.
“As the roulette wheel continues to spin, UK plc is having to place its bets based on best guesswork and the stakes could not be higher.
“Companies are making decisions now about jobs, supply chains, headquarters and asset locations- incurring significant, and possibly unnecessary, cost and upheaval.
“We fear the destructive effects of a ‘no deal’ outcome on the economy so urge our politicians to work together to break the Brexit deadlock and help restore business confidence.”
The proportions of companies reporting growing concerns over the availability of non-management skills and staff turnover have risen, from 24% and 18% respectively in Q1 2018, to 34% and 28% in the current quarter.
That reflects tightening in the labour market, with the latest ONS data reporting an unemployment rate of just 3.1%, the joint lowest in the UK.
The region is also more reliant on migrant labour than any other apart from London, and the UK has been experiencing a decline in net inflows of people from the EU.
Businesses are however achieving healthy sales performance, outpacing the national averages. Both domestic and export sales are growing by 4.4%. The former is up from 3.6% a year ago, while the latter is broadly the same as the previous 12 months.
Businesses expect slightly slower growth in domestic sales (4.0%) and exports (3.8%) over the next 12 months. Linked to that, profits growth is predicted to also slow moderately, to 3.8% in the year to Q1 2020.
