Businesses are lacking confidence heading into the new financial year, and expect lower sales, prices and profits, the new Dun & Bradstreet Business Expectations Survey reveals.
The survey reveals capital investment expectations dropped three points to 13, while expectations for growth in inventories dropped two points to an index of seven – even though this index is now at its second highest point in five years.
Selling price expectations have fallen two points to 17, while employment expectations have fallen four points to an index of five.
Profits expectations are now down five points to 12, but is still at its second-highest level in five years, while sales expectations are down 15 points to an index of 18.
Additionally, businesses are still having a hard time accessing finance. The survey reveals 12% of companies had less access to credit in the last quarter, while recent changes in credit conditions have affected 47% of companies.
Moreover, 30% of companies expect to reduce debt in the next three months, 7% expect to increase it and 56% plan to maintain their current funding levels.
D&B’s director of corporate affairs Damian Karmelich says while a number of businesses are less bullish about their prospects, the results are still positive overall and executives are confident about the next months.
“I would describe it as subdued confidence. I think it’s worth noting that all of the key indices remain in positive territory, even though they’ve declined. They haven’t plummeted, so I wouldn’t jump off a cliff just yet.”
“At the end of the day, executives still have positive expectations for everything. Clearly what’s good is that after rate rises, and the winding down of stimulus, executives are still positive.”
However, there are still some real risks to businesses. The survey quotes 53% of executives are being impacted by lagging business to business payment terms, with that figure up by 17% since April. Karmelich says executives need to chase their money.
“Businesses fail because of a lack of cash, so they need to get out there and chase the money they’ll need.”
Additionally, Karmelich says margins are going to be under increasing pressure over the next six months, especially in retail.
“One of the key signs is the drop of sales expectations, a drop of about 15 points. Selling price expectations are also dropping away, and costs are continuing to rise, but businesses aren’t putting up prices. This means managing the detail of business will become important as margins are pressured.”
However, the survey still notes that 29% of businesses expect profit levels to increase, stating that “the number of firms expecting to increase profits is strong”.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
