Business Outlook 2015 Q2 Summary Business confidence is a unique gauge of economic activity. It is the measurement of what business owners and executives think is going to happen in the future. Therefore, business confidence reports are one of the few forward looking data sets available to members of the business community. Business confidence reports therefore represent an important source of information for businesses. Because of the uncertainty involved it is strongly recommended that a variety of information sources be utilized by both the business community and policy makers for more effective decision-making. ABELIAN Consulting Services, in collaboration with the Barbados Chamber of Commerce & Industry (BCCI) has set about trying to understand confidence levels over time and developed this series of surveys. The objective is to assist local businesses in their decision-making by understanding LOCAL data and information. Business therefore do not have to rely on national data or the media, for information on business confidence levels. This is the second instalment of the Business Outlook for Barbados and we wish to sincerely thank the BCCI and other associations within the Barbados Private Sector Association (BPSA) that made this survey possible. We wish to especially thank the many business owners and executives that took the time out of their busy schedules to participate in the survey and answering the questions.
Conducted by ABELIAN Consulting Services in collaboration with Barbados Chamber of Commerce & Industry Barbados
SURVEY METHODOLOGY
performance data when answering the
The Business Outlook survey was designed and executed to capture business responses in Barbados.
questions in the surveys whilst also taking into consideration any relevant issues currently affecting their industry and/or sector.
The
responses are then converted into a net
The survey questions were designed with
balance statistic via the calculation:
input from the BCCI Trade and Economic Policy Committee and ongoing feedback from participants. benchmarking
đ?‘›đ?‘’đ?‘Ą đ?‘?đ?‘Žđ?‘™đ?‘Žđ?‘›đ?‘?đ?‘’ (%) = [
This would allow for
confidence
levels
(đ?‘– − đ?‘‘) ] ∗ 100 (đ?‘– + đ?‘‘ + đ?‘&#x;đ?‘Ąđ?‘ )
on
Barbados against other countries over a
Where đ?‘– is
period of time.
responses; đ?‘‘ is the number of “deterioratedâ€?
Opening on Tuesday April 07, 2015 and closing on Monday April 20, 2015, the survey
and executives. The questions were short and simple and took on average approximately 8 minutes to complete for most respondents.
number
of
“improved�
responses; and đ?‘&#x;đ?‘Ąđ?‘ is the number of “remain the sameâ€? responses; F IGURE 1: C ONFIDENCE R ANGE
was distributed exclusively online via email to a wider cross section of the business owners
the
Very low -100 -60
Low
Balanced -20
Moderate +20 +60
High +100
Figure 1 shows the range of the net balance statistic which has a minimum of -100 (0 improved
and
remained
the
same
The last question asked if the respondent
responses) and a maximum of +100 (0
wished to leave their email address for
deteriorated
purposes on email alerts regarding the
responses).
release of the results.
Research shows a strong positive correlation
The privacy of all
respondents will be maintained at all times. Although the survey is qualitative in nature,
between
and
remained
business
the
same
confidence
and
economic growth. Countries with consistent
the reported statistic for each question is a
metrics
single
confidence spectrum tend to have stronger
net
balance
number
where
applicable. That is, for each question the respondent is asked to indicate “improved� or
“increased�,
“deteriorated�
on
economic
the
greener
performance
end
of
which
the is
underpinned by the robust business activity.
or
“decreased�, or “remained the same�. Respondents are expected to extrapolate from their own experience driven by internal
www.abelianconsulting.com
Page 2 of 13
Business Outlook 2015 Q2
Industry Analytics The major respondents to this survey were Industry
Responses
Percent
Agribusiness
4
2%
Banking
8
4%
Business services
17
8%
Construction
7
3%
Consulting
6
3%
Education
1
0%
Energy
2
1%
Engineering
2
1%
Entertainment
1
0%
Financial Services
16
8%
Government
0
0%
Healthcare
7
3%
Hospitality
6
3%
Hotel/Accommodatio n Information Systems
5
2%
3
1%
Insurance
9
4%
Legal
27
13%
Leisure
2
1%
Manufacturing
28
13%
Media/Publishing
8
4%
Non-profit association
2
1%
Real Estate
2
1%
Retail
17
8%
Technology
10
5%
Telecommunications
4
2%
Transportation
9
4%
Utilities
1
0%
Wholesale
7
3%
TOTAL
211
100%
Skipped
40
www.abelianconsulting.com
from the finance sector (16%) which includes banking, insurance and financial services executives.
Manufacturing
and
level
professionals both represent 13% of the respondents.
Category Micro (<=10) Small (11-50) Medium (51-100) Large (101 or more) Total Skipped
Responses 85 78 15 45 223 28
Percent 38% 35% 7% 20%
Responses from small and medium size businesses made the majority (73%) of the survey. NUMBER OF RESPONDENTS There were 251 responses to the Business Outlook 2015 Q2 compared to 56 during 2015 Q1.
Page 3 of 13
Business Outlook 2015 Q2
General Business Confidence A1.1: With regard to the Barbados Economy, do you believe that General Business Conditions in 3 months' time will have?
Respondents generally felt more positive about general business conditions 12 monthsâ&#x20AC;&#x2122; time than in the short term.
Improved
Whilst the
percentage who believes conditions will
7%
deteriorate is fairly steady around 30%, a Deteriorated
larger number of respondents 34% more
33%
respondents believe business conditions will Remained the same
improve over the next 12 months when
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
compared to the next 3 months. Business Confidence levels range from low
Net balance (%): -27% Confidence: LOW
with regards over the next 3 months to negatively balanced over the next 6 months
A1.2: With regard to the Barbados Economy, do you believe that General Business Conditions in 6 months' time will have?
to positively balanced over the next 12 months.
Improved
17%
Deteriorated
31%
Remained the same
52%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -14% Confidence: BALANCED A1.3: With regard to the Barbados Economy, do you believe that General Business Conditions in 12 months' time will have?
Improved
41%
Deteriorated
30%
Remained the same
28%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): +11% Confidence: BALANCED
www.abelianconsulting.com
Page 4 of 13
Business Outlook 2015 Q2
Economic Indicators Respondents were not very positive with their expectations
A3.1: How do you expected the Unemployment Rate to have changed in 12 months' time?
Decreased
for
employment
in
the
economy as almost two-thirds expect the unemployment rate to increases over the
12%
next 12 months. Overall confidence for this Increased
indicator is low.
63%
Remained the same
25%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -50% Confidence: LOW
Despite
Decreased
the
announcement
of
the
liberalization of interest rates on April 7, 2015,
A3.2: How do you expected Interest Rates on Loans to have changed in 12 months' time?
a majority of respondents (51%) felt that interest rates on loans would not change in
21%
12 monthsâ&#x20AC;&#x2122; time. Further, some 28% indicate Increased
an expectation that interest rates loans will
28%
rise. Overall, the confidence indicator is Remained the same
negatively balanced.
51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -7% Confidence: BALANCED
Similarly, 50% of respondents felt that interest A3.3: How do you expected Interest Rates on Overdrafts to have changed in 12 months' time?
rates on overdrafts will remained unchanged in 12 monthsâ&#x20AC;&#x2122; time. 40% also felt that these
Decreased
rates on overdraft will increase. The overall
10%
confidence Increased
Remained the same
indicator
is
therefore
characterized as low.
40%
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -30% Confidence: LOW
www.abelianconsulting.com
Page 5 of 13
Business Outlook 2015 Q2
Firm Level Confidence One-third of respondents expect their firmâ&#x20AC;&#x2122;s
B1: With regard to Your Business, how do you expect Real Business Activity to have changed in 12 months' time?
Increased
real business activity to increase over the next 12 months whilst nearly 50% expect this
33%
indicator to remain the same. 1 out of every Decreased
5 respondents however expect real business
21%
activity to decrease. Remained the same
The net effect is a
positively balanced confidence indicator.
46%
This is consistent with general business 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): +12% Confidence: BALANCED
conditions indicator. With respect to real profits, just over 1 in 3 respondents (37%) expect their firmâ&#x20AC;&#x2122;s real
B2: With regard to Your Business, how do you expect Real Profits to have changed in 12 months' time?
profit to decrease over the next twelve months.
Increased
The confidence level for this
indicator is negatively balanced. Though it is
21%
within the same range as the real business Decreased
activity indicator, there is a 27 percentage
37%
point differential between indicators that Remained the same
may be somewhat counterintuitive.
42%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Firm level expectations for employment prospects over the next 12 months are
Net balance (%): -15% Confidence: BALANCED
bearish as some 41% expect their staffing levels to be reduced. 15% are classified as
B3: With regard to Your Business, how do you expect Employment to have changed in 12 months' time?
small, 12% large and 11% as micro businesses. Less than 20% indicated an expectation of
Increased
17%
increasing employment in the next 12 month. This results in low confidence rating for this
Decreased
41%
Remained the same
42%
indicator which could be a sign of the tenuous
0%
10%
20%
30%
40%
50%
of
economic
recovery.
Notably, 42% of respondents indicated their 60%
Net balance (%): -25% Confidence: LOW
www.abelianconsulting.com
nature
70%
80%
90%
100%
firm is expected to maintain the same level of employment over the next 12 months which is a good sign.
Page 6 of 13
Business Outlook 2015 Q2
Firm level Confidence There were 170 responses to the questions
B9: With regard to Your Business, how do you expect Inventories to have changed in 3 months' time?
Increased
related
to
inventories.
The
level
of
confidence in this area were both negatively
10%
balanced shown in the charts with little Decreased
difference in the overall indicators between
28%
the two time periods. Of note however, was Remained the same
that more respondents felt their inventories
62%
level would increase in 6 monthsâ&#x20AC;&#x2122; time 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
relative to in 3 monthsâ&#x20AC;&#x2122; time than those that think their inventories will decline.
Net balance (%): -18% Confidence: BALANCED B10: With regard to Your Business, how do you expect Inventories to have changed in 6 months' time?
Increased
21%
Decreased
36%
Remained the same
43%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -15% Confidence: BALANCED
In spite the deregulation of monetary policy with respect to interest rates on deposits, only
B13: Will it be easier or harder to get credit in 12 months time?
Easier
14% of respondents felt it would be easier to get credit in 12 monthsâ&#x20AC;&#x2122; time.
14%
44% felt it
would be harder whilst 42% thought access
Harder
to credit would be the same. The net result is
44%
that the overall confidence level for this Remained the same
important indicator is low.
42%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): -30% Confidence: LOW
www.abelianconsulting.com
Page 7 of 13
Business Outlook 2015 Q2
Past Business Performance
Future Business Performance C2: How do you believe your business will perform in the NEXT 6 months compared with the last 6 months?
C1: How has your business performed over the LAST 6 months relative to the previous 6 months? Much stronger
Much stronger
3%
Somewhat stronger
Somewhat stronger
23%
About the same
10%
16%
Much weaker
7%
0%
44%
Somewhat weaker
30%
Much weaker
30%
About the same
37%
Somewhat weaker
6%
20%
30%
40%
50%
60%
70%
80%
90%
4%
0%
100%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net balance (%): +17% Confidence: BALANCED
Net balance (%): -12% Confidence: BALANCED Over the last 6 months, 37% reported that
Over the next 6 months, more business
their businesses performed weaker than the
owners and executives expect their firms to
previous 6 months.
Of this, 8% of the
perform stronger than the last 6 months by a
respondents were from large businesses, with
margin of 17% compared to those that
manufacturing at 3%. 13.5% of respondents
believe their businesses will perform weaker.
were from both small and micro enterprises.
Of the 36% of respondents anticipating
Of the 26% that reported stronger business performance, 9% were from micro businesses and 8% from small enterprises. Confidence is negatively balanced as more businesses registered a weaker performance than those that had a better outturn when compared to the previous 6 months.
improved business performance over the next 6 months, 25% are firms in the micro and small segments. This results in a positively balanced level of confidence and perhaps represent some green shoots of growth looking ahead. Small and micro businesses being more optimistic in
the
short
term
is
a
good
signal.
Respondents from micro legal firms are the most upbeat about prospects over the next 6 months.
www.abelianconsulting.com
Page 8 of 13
Business Outlook 2015 Q2
Major Constraints on Business In your opinion, what are the major constraints on the growth of your business? Respondents could select more than one answer to this question. Answer choices
Responses
Percentage
National economic performance
160
64%
Price pressure from customers
103
41%
Price pressure from competitors
102
41%
Rising overheads and utility costs
93
37%
Declining customer base
82
33%
Problems with government planning regulations
70
28%
Licensing and regulations
58
23%
Global economic performance
51
20%
Price pressure from suppliers
51
20%
Regional economic performance
49
20%
Difficulties in obtaining finance / extending credit facilities
38
15%
Increased competition from low cost imports
34
14%
Rising transport costs
32
13%
Availability of skilled workers
29
12%
Rising production costs
29
12%
Declining visitor numbers
20
8%
Limited supply of production materials and/or product
17
7%
Broadband and information technology access
13
5%
Access to training
10
4%
Reduced demand for exports
8
3%
Transport infrastructure
4
2%
Environmental catastrophes (hurricanes, flooding, earthquakes etc.) Shortage of commercial land
3
1%
2
1%
Declining demand from customers
0
0%
www.abelianconsulting.com
Page 9 of 13
Business Outlook 2015 Q2
Feedback The following is a selection of comments provided by respondents on general issues affecting businesses in Barbados.
Drop in fuel prices has dampened customersâ&#x20AC;&#x2122; enthusiasm
for
solar
PV
products.
Some
customers are adopting a wait and see attitude while using the electricity cost reductions to fund other aspects of their businesses
We are finding more competition within our niche market, especially from Commercial banks, nonetheless we view this as a good thing because it means that we have to constantly redefine ourselves and stay in tuned with the changing needs of our customers.
Government's cash flow challenges are putting added strain on the cash flow and revenue
Collecting payment from government for goods
streams of businesses who conduct business with
and services has put a major strain on cash flow.
them.
Increased taxes - solid waste, tipping fee, landing charges at the port - have all increased
Newly implemented taxes cannot be passed on, therefore there is even less return on equity for
costs and we have been unable to pass these on so it has reduced profits.
our shareholders making investment in Barbados even less attractive than before, this is simply the opposite to what should be done
by the
Government.
Persons are being more conservative with their spending whether they are an individual, a corporation or small business. Trying new things or taking new approaches takes a certain level
Need for greater mobilization of Bridgetown
of monetary investment which is not readily
businesses, using BCCI as a catalyst, to stimulate
available. It is a matter of find other avenues of
economic activity.
generating revenue or shut down.
The cost of doing business is simply too high. Commercial rents have reached unacceptably high rates and the cost of consumables is prohibitive.
Dealing
with
the
new
Barbados
Revenue
Authority is a major challenge. With the merger of the 3 tax entities into one, key knowledgeable staff in each area have been shifted around to other areas or laid off. There seems also to be a
Poor Business Facilitation continues to present
shortage of manpower to handle the change in
obstacles
administration and use of technology being
to
doing
business.
The
Authorities/country needs to get Crime under
pushed to the public.
control and fast!
www.abelianconsulting.com
Page 10 of 13
Business Outlook 2015 Q2
Economic Analysis The latest results of the Business Outlook 2015 Q2 show that businesses are still experiencing tough times. As a result, overall economic activity continues to struggle in the face of multiple challenges currently facing businesses.
Firms are bearish about their own employment
prospects and a significant proportion view access to credit as getting harder over the next 12 months. Though the low response in 2015Q1 makes it difficult to deliver meaningful comparisons for individual confidence indicators, we can still review the overall business with some degree of
Business Confidence 0%
-5%
-10%
-10%
-15% -16% -20%
-25% 2015 Q1
2015 Q2
confidence. The overall business confidence for 2015 Q2 is still negatively balanced and estimated at -10%, compared to -16% during the first quarter of 2015. Of the 21 indicators for which the next balance statistic is calculated, only 4 registered positives measures of confidence which are as follows:
General business conditions in the next 12 months (+11%)
Real business activity in 12 months’ time (+12%)
Price of good/service in 3 months’ time (+19%)
Volume of activity in non-residential construction in 12 months’ time (+4%)
www.abelianconsulting.com
Page 11 of 13
Business Outlook 2015 Q2
These 4 indicators fall in the balanced category and is not sufficient to offset the negative confidence levels of the other 17 indicators to reach positive territory overall. Interestingly, the monetary policy announcement by the Central Bank of Barbados at the beginning of the survey period did not appear to have any significant influence the responses as it relates to interest rates on loans and overdrafts and the relative ease of accessing credit in general. Only 10% expected lower interest rates on overdrafts in 12 monthsâ&#x20AC;&#x2122; time, whilst 21% expect rates of loans to decrease. Some 86% also expected that itâ&#x20AC;&#x2122;ll be harder to access credit in 12 monthsâ&#x20AC;&#x2122; time (44%) whilst 42% expected access to remain the same. On the bridge side, firms are much more positive and upbeat about the future, with 36% of business owners and executives expecting stronger trading levels over the next 6 months. Only 20% expect a weaker performance over the next 6 months. For there to be significant growth in in the economy this year, this optimism must be translated into improvement in real business activity which should be accompanied by the higher employment levels. The Budgetary and Financial Statement of the government is expected to be delivered later this month which follows the Estimates of Revenue and Expenditure laid in Parliament in March 2015. We will have to wait for the results of the next survey to see if the optimism of some businesses is realized or if continued fiscal pressures further challenges the Barbados economy.
www.abelianconsulting.com
Page 12 of 13
Business Outlook 2015 Q2
Acknowledgements With the support of the following organizations this survey would not have been possible. We would like to sincerely thank the following:
Barbados Agricultural Society – http://www.basonevoice.org/
Barbados Association of Retired Persons – http://www.barpbb.com/
Barbados Bankers’ Association
Barbados Chamber of Commerce & Industry – http://barbadoschamberofcommerce.com/
Barbados Coalition of Service Industries - http://bcsi.org.bb/
Barbados Employers’ Confederation– http://www.barbadosemployers.com
Barbados Hotel and Tourism Association – http://www.bhta.org/
Barbados Industrial Development Corporation – http://www.bidc.org/
Barbados International Business Association – http://www.biba.bb/
Barbados Manufacturers’ Association – http://www.bma.bb/
Barbados Small Business Association – http://www.sba.org.bb
Hoyos Publishing
Institute of Chartered Accountants of Barbados (Associate Member) – http://www.icab.bb
Miller Publishing
Legal Disclaimer This report provides information designed to help users cope with their own business, financial, legal and other needs. This information is not the same as retaining experts in those fields for advice. Although we go to great lengths to ensure the information is accurate, we strongly recommend you consult an expert, including but not limited to an economist, accountant, financial services consultant, lawyer or other professional as appropriate. Nothing contained in this report is to be considered as the rendering of financial, professional, legal or other advice for specific cases, and users are responsible for obtaining such advice from their own financial, legal or other counsel.
The information contained in this report is intended for educational, background and
informational purposes only.
www.abelianconsulting.com
Page 13 of 13
Business Outlook 2015 Q2