Confidence about future growth is at its highest level since 2018

International trade cargo

More than three fifths (65 per cent) of UK businesses are confident about growth over the next three years, according to the latest Santander Trade Barometer published today. With the Covid-19 vaccination programme in full swing, business confidence is now at the highest level seen since the summer of 2018, and up from 59% in autumn 2019.

Regional business confidence has bounced back too with all regions improving except Wales and the South West. Scotland saw the biggest rise, up almost 25 per cent to 74 per cent since autumn 2020. Companies surveyed considered the successful rollout of the Covid-19 vaccine as the most important growth driver going forward.

Santander Trade Barometer Infographic Spring 21 (1)However, despite confidence for the future, current business performance continues to deteriorate. Travel and leisure companies have been worst hit with 61 per cent saying performance has deteriorated in the last 12 months, while manufacturers also continue to suffer (46 per cent). Wholesale and retail firms have meanwhile fared better, with 49 per cent reporting an upturn. The barometer does show that UK companies with an international presence continue to show higher levels of both business confidence and performance.

John Carroll, Head of International & Transactional Banking, Santander UK said: “Despite the current challenges, it’s reassuring to see the vaccine programme has had a marked impact on business confidence and many are preparing for growth. While hopes are high for domestic demand fuelling the post-pandemic recovery, there’s also a big opportunity for British firms in overseas markets. International trade can play an important role in helping UK businesses to emerge from the pandemic successfully and get back to growth.”

In the first barometer since the UK’s departure from the European Union, concerns about the impact of Brexit have fallen to their lowest ever level. Despite this, 38% of companies say that the new UK-EU deal will make trading with the EU more time consuming and 35 per cent say they now have to pay higher charges, tariffs or local taxes as a result. Almost a quarter  said the increase in costs and bureaucracy will prohibit their business from continuing to trade in its existing markets, while 16% say their supply chain will no longer be profitable as a result of the EU trade deal.

North America (32 per cent) has overtaken the EU (31 per cent) as the region seen as offering the greatest growth opportunities during the next 12 months and on a country basis, the US (31 per cent) leads China (17 per cent), Australia (17 per cent), Germany (16 per cent), France (12 per cent) and Japan (12 per cent) as offering the most attractive growth prospects. The effect of a new president in the US has also seen the proportion of businesses concerned about the negative impact of increased protectionism on future growth reduce from 17 per cent to 10 per cent since autumn last year.

While Covid-19 remains the main source of negative impact on business performance over the next 12 months, UK businesses believe the main drivers of recovery will be: growth in: the domestic market; growth in existing international markets; diversification; and tech driven efficiency and productivity gains. A quarter (26 per cent) of companies say that international trade has become more important as a result of Covid-19, whereas only 5 per cent say it’s become less important, with the proportion of domestic-only businesses which say they are considering international expansion is at its highest level to date (20 per cent).

The coronavirus pandemic has presented opportunities for nimble companies that are quick to adopt a more digital approach, with over a quarter reporting that they expect new opportunities to arise from digital technologies, products and solutions and over half of those switching their sales channel to an e-commerce platform.  A quarter of companies are considering diversifying their products or services offering, a fifth  rethinking their supply chain, 17 per cent are considering diversification of providers, suppliers or business partners.

Business’ biggest concern about trading internationally in most regions of the world remains bureaucracy (44 per cent), while 30 per cent of respondents are concerned about missed opportunities due to cancellations of international conferences and events as a result of Covid-19.