Enterprise Index reflects uncertainty despite confidence in the economic outlook28 May 2015
Guy Rigby reflects on the reasons behind the recent dip in the Smith & Williamson Enterprise Index.
Starting from a benchmark of 100 in January 2013, the Smith & Williamson Enterprise Index now stands at 104.4, marginally down from 106.8 in Q4 2014, and down from a high of 108.7 at the beginning of 2014.
This drop appears to reflect uncertainty in future stability due to a range of political and economic factors, such as the depreciation of the euro, the threat of Grexit, oil price volatility and the continuing unrest in Ukraine and the Middle East. Business thrives on confidence and is threatened by global uncertainties. It seems that the volume has been turned up and the sheer number of these challenges is currently the biggest threat. These add to uncertainty closer to home prompted by the UK General Election, with concerns about the impact on the economic recovery and the longer-term prospects for business.
What the results show
- 65% of business owners believe their long-term interests will be better served by eliminating the deficit, rather than increasing public sector borrowing.
- More than seven in ten (71%) believe the UK economy will continue to improve over the next 12 months.
- 74% of respondents believe that investment in cyber security needs to be strengthened following recent high-profile attacks.
- 78% agree that flexible working arrangements are essential in the war for talent, with an increasing number of businesses adopting new employment practices.
Businesses seek responsible economic policies
The Smith & Williamson Enterprise Index asked respondents whether they thought businesses’ long-term interests would be better served by eliminating the deficit through spending cuts or increasing public sector borrowing. As a clear indication of business sentiment ahead of the election, 65% of those surveyed indicated their belief that businesses’ long-term interests would be better served by plans to eliminate the deficit, in line with current policy.
This makes an interesting comparison with one of the index’s core questions, which asks whether or not the economy will improve over the next 12 months. A strong majority of 71% respondents said they expect the economy to improve, indicating a continuation of current policy.
Flexible working becomes a battleground
78% of business owners agreed that increasing flexible working opportunities is essential in the war for talent. This suggests that they either already offer flexible working or believe that they must implement such policies to be able to attract and retain the best talent.
In December, following research by the Centre for Economics and Business Research and software company Citrix, which suggested that flexible working could boost the economy by £90bn, Jacqueline de Rojas of Citrix called for a “mentality shift” among UK businesses. She said that “it is time to move on from judging workers on how long they spend at their desks to evaluating them on the work they actually deliver. Those that choose not to enable workplace mobility will lose out in the war for talent.”
Following a number of high-profile cyber-attacks, the Enterprise Index asked respondents whether they agreed that businesses need to increase their investment in cyber security. Nearly three-quarters (74%) agreed that cyber security needs additional investment by businesses.
There were few absolute detractors, indicating that this topic will feature prominently on future boardroom agendas.
The Smith & Williamson Enterprise Index measures the confidence of the UK’s wealth creators and entrepreneurs in the economy and the implications that it has (or may have) on their businesses.
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