Business confidence reached its highest point in the 21-year history of the professional practices survey conducted annually by Smith & Williamson, the accountancy, investment management and tax group.
Almost all (99%) of the respondent firms cited a positive outlook for the year ahead, up from 96% in 2014 and exceeding the previous high point of 98% in 2006.
What’s more, professional services firms in the South West were among the most confident in the UK with more than one-third (36%) describing themselves as ‘very confident’ about their prospects for the coming year.
Krista Woodman, a director in the Cheltenham office of Smith & Williamson, said: “Our survey shows that professional services firms in the South West are enjoying an unprecedented level of confidence. This is a genuine signal that activity is now exceeding the levels seen before the financial crisis. Political certainty, economic resurgence and corporate actions are driving optimism.”
However, while firms in the South West are among the most confident, they are reporting a higher level of competitive pressure than firms in many other regions. According to the survey, 86% of firms in the South West believe competitive pressure has increased in the last year. This contrasts with firms in, for example, the South East (excluding London) where just 59% felt competitive pressures have increased. The equivalent figure for the UK-wide group was 70%.
According to Smith & Williamson, these intense competitive pressures reflect widespread changes in the professional services market, driven largely by new entrants to the sector and new ways of working. Krista Woodman said: “Professional firms are being squeezed on all sides by the arrival of new business models and new entrants to the market. In particular, all firms face a massive threat from new uses of technology to gain and interact with clients.”
She continued: “Firms need to develop a ‘clear differentiator’ to stand out from the crowd, thereby demonstrating the value they deliver and to help them resist downward pressure from clients on fees.
“If firms are simply enjoying improved performance from an improvement in the economy, they shouldn’t be surprised if they quickly slip into reverse when the economy takes a downturn.”
93% of the respondents from the South West believe the outlook for their business has strengthened since the May general election. This compares with 78% of the total respondent group who thought the outlook for their practice had improved since the election.
Lateral hires and further investment for the South West’s firms
72% are seeking to increase lateral hires in the coming year and Krista Woodman believes that higher levels of team ‘poaching’ are almost inevitable in the current climate. The survey also reveals that just under two thirds (64%) of firms in the South West are planning to increase the range of services they offer in the next twelve months. 71% are proposing to grow their marketing spend and 79% to raise the amount they put into IT.
However, Krista Woodman cautions: “While the majority are trying to up their game, any firm lacking an appetite for change or without strategic vision and drive to differentiate themselves in today’s fast-changing market could suffer the consequences. With the economy currently relatively benign, now is the time to face any tough strategic decisions and to invest appropriately to build the business.”
