The ICAEW Business Confidence Monitor (BCM) suggests that GDP growth could drop from 0.5% in Q1 to 0.2% in Q2, due to the impact of stock building, which “probably temporarily boosted GDP”.
“Businesses I speak to say that there is no sense that things will change much in the next few months and this is reflected in their confidence. Many have stockpiled ahead of the expected March exit from the European Union, but this did not happen. Stockpiling is expensive for businesses, but it did boost GDP growth,” said Michael Izza, ICAEW chief executive.
“However, my fear is that this will have an impact on growth and GDP figures in the rest of the year, so we should not be surprised to see even lower growth than normal while companies use up the excess stock they now have,” added Izza.
Stock building of raw materials and components is most widespread among businesses in the manufacturing sector.
Business confidence remains negative (-16.6) but has not fallen sharply for the first time in year. Transport and storage (-26.7) and property (-26.1) are the least confident sectors, according to the BCM.
Sales growth has been “slow and steady” and is predicted to remain so for the year. Employment is also growing slowly, said ICAEW.
By Raymond Doherty