Economic Challenges Facing Global and Domestic Business

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Economic challenges facing UK business
Ipsos MORI SURVEY – NOVEMBER 2011

Methodology 122 structured telephone interviews of approximately 15 minutes conducted between 6th October and 4th November 2011

Survey sample
Sample by sector
Manufacturing

Where is the location of your head office?

15%

22%

Construction Financial services

15% 9% 15%

34%

UK

Retail, transport & distribution Non-financial services Other

66%

Outside the UK

24%

Sample by global revenue
50
40 30 20 10

Apart from the UK, how many other countries do you operate in? 14%
None

35% 21%

1-10 11-20 21-50 Over 50

23%
0 < £100m £500m-1bn £1-5bn > £5bn

7%

Business confidence has deteriorated sharply
How has your level of confidence in the economic outlook changed since August? 40
Eurozone crisis

Reasons for fall in confidence
0 10 20 30 40 50 60

20

Consumer demand Slow growth

0 Deteriorated -20

Global economic conditions Instability in financial markets Sovereign debt crises Negative media coverage Reduced flow of work Poor government strategy

Stayed the same Improved

-40

-60

Length of downturn Sluggish recovery in the US

-80

Level of unemployment

-100

“The euro crisis is definitely damaging confidence in many ways”

Eurozone and banking crisis concerns are weighing on confidence Factors expected to influence the economy in 2012
No influence 0 Eurozone sovereign debt crisis Further banking crisis 20 Moderate influence 40 Strong influence 60 80 100

Rising commodity prices

Currency volatility

Lack of growth in the US

Chinese growth levels Protectionism and trade friction Stability in the Middle East

Main risks to business stem from financial instability and lack of domestic demand Risks to business over the next 12 months
Minimal/no risk
0 Financial market volatility/weakness Lack of domestic demand Rising costs Availability of finance Under investment Domestic competition Overseas competition Lack of export demand Fluctuating currency Industrial action 20

Significant risk
40 60

Very serious risk
80 100

“People have factored in the current economic climate, and it is having a bearing on their plans”

Manufacturers more exposed to global conditions
Risks to business over the next 12 months
45 40 35 30 25 20 15

+9%

Total sample

Manufacturing

+22% +13%

+8%

10
5 0 Financial market volatility Lack of Rising costs Availability Under Domestic Overseas domestic of finance investment competition competition demand Lack of export demand Fluctuating currency Industrial action

Prospects for business deteriorated – but not by as much as sentiment Confidence and business prospects
60 40 -5 20 -10 0 -20 -40 -60 -80 Deteriorated Stayed the same Improved -20 -15 0

Business prospects by firm size
Total sample Under 1000 1000-4999 5000+

-25

-30

Number of employees
-100
Confidence Business prospects -35

Business strategy is being reappraised
Are you likely to change business strategy?
2%

Changes to investment and hiring in the year ahead
60 Yes

39% 59%

No Don't know

40

20 Decreased

Aspects of business strategy likely to change
0 Workforce plans 5 10 15 20 25 30

0 Increased -20 Stayed the same

-40 Investment plans -60 Expansion plans Financial strategy Production plans -80 Investment intentions Hiring intentions

Strong support for fiscal consolidation
Should the government’s deficit reduction strategy continue or be scaled back? Continue Scale back Don’t know
Investment in infrastructure Cut in employment taxes

Preferred measures to stimulate short-term growth
0 10 20 30 40 50 60 70 80 90

1%

17%

Cut in business taxes Cut in income taxes Stimulate the housing market

82%

Cut in VAT Increase other current spending Increase welfare spending

“The most important thing is to demonstrate that we continue to be committed to deficit reduction – maintaining...
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