October data from the IHS Markit UK Business Outlook survey indicate a slight drop in optimism since June, with the degree of positive sentiment remaining close to the ten-year low recorded at the beginning of 2019.
The net balance of UK private sector firms anticipating an increase in business activity during the next 12 months is +31% in October, down from +32% in June and well below the average since the start of the series in 2009 (+44%).
Growth expectations in the manufacturing sector slipped to the lowest since October 2011.
Business activity projections among service providers are unchanged from those reported in June.
The downturn in manufacturing sector optimism mirrors the weaker trends recorded by the latest IHS Markit Business Global Outlook surveys in other major developed markets, especially the euro area and the United States.
Goods producers around the world cite concerns that the US-China trade war would continue to hold back export sales and business investment.
UK manufacturers also cite Brexit-related uncertainty as a headwind to output growth, capex plans and staff hiring.
A stabilisation in UK service sector optimism since June stands in contrast to the worldwide picture.
The equivalent global index of service sector business confidence is now the lowest since the start of the survey in October 2009.
At +16% in October, the net balance of UK private sector firms expecting to increase their staffing levels in the next 12 months is up from +14% in June and the highest since mid-2018.
There are contrasting trends for employment intentions between service providers and manufacturers.
The net balance of service sector companies expecting to boost their staffing numbers is +17%, up from +14% in June.
Meanwhile, the equivalent employment net balance for goods producers is +8% in October, down from +13% in June and the lowest for eight years.
Business investment is expected to remain subdued over the next 12 months.
The net balance of UK private sector firms anticipating a rise in capex is +3% in October, which remains below the equivalent indices for the euro area, the United States (both at +6%) as well as Japan (+11%).
Research and development spending across the UK private sector is set to flatline in the year ahead, according to the latest survey data.
The neutral net balance for R and D expenditure contrasts with positive readings in other developed markets, including Japan (+6%), the euro area (+4%) and United States (+4%).
The main positive finding from the latest UK business outlook survey is a moderation in inflation expectations for the coming 12 months.
At +29% in October, the net balance of firms anticipating a rise in their non-staff costs is down from +32% in June and the lowest since mid-2016.
However, projections for payroll expenses are unchanged since June, with a net balance of +51% of companies forecasting an increase in their staff costs over the year ahead.
A slight rise in wage expectations across the service sector during October more than offset a marked drop in the balance of manufacturers predicting an increase in staff costs.
Meanwhile, the net balance of firms expecting to increase their output charges is +31% in October, which is down from +34% in June.
This reflects a slowdown in pricing intentions among both manufacturing and service sector companies.
Profits expectations remain relatively subdued across the UK private sector, with the net balance of firms predicting an improvement slipping to +14% in October (down from +15% in June).
The overall drop in profits expectations is centred on manufacturing, where optimism is down to the lowest for three years.
The latest downbeat figures for UK corporate earnings are mirrored across the IHS Markit Global Business Outlook survey in October.
Profits expectations in the euro area are now negative for the next 12 months (net balance at -2%), while those in the United States are the weakest since February 2016 (+8%).
With the equivalent index in Japan also at a relatively low level (net balance at +2%), the overall index for developed markets profits expectations in October is the weakest since the series began in 2009. ■