Business Outlook 2015 Q3 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.
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
The
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
owners 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
the
Very low -100 -60
Figure 1
Low
Balanced -20
Moderate +20 +60
High +100
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.
The privacy of all
respondents will be maintained at all times.
and
remained
the
same
Research shows a strong positive correlation between
business
confidence
and
Although the survey is qualitative in nature,
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
on
the
greener
of
economic
respondent is asked to indicate “improved�
underpinned by the robust business activity.
“increased�,
“deteriorated�
which
the
applicable. That is, for each question the or
performance
end
is
or
“decreased�, or “remained the same�. Respondents are expected to extrapolate from their own experience driven by internal
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Business Outlook 2015 Q3
The major respondents to this survey were
Industry Analytics
from
the
finance
sector
(16%)
which
Industry
Responses
Percent
includes banking, insurance and financial
Agribusiness
3
3%
services executives.
Banking
2
2%
level professionals both represent 13% of the
Business services
8
8%
respondents.
Construction
6
6%
Consulting
4
4%
Education
0
0%
Energy
2
2%
Engineering
1
1%
Entertainment
0
0%
Financial Services
7
7%
Hospitality
3
3%
Hotel/Accommodation
3
3%
Information Systems
2
2%
Insurance
5
5%
Legal
13
12%
Leisure
1
1%
Manufacturing
21
20%
Marketing
1
1%
Media/Publishing
1
1%
Non-profit association
1
1%
Real Estate
5
5%
Retail
7
7%
Technology
2
2%
Telecommunications
1
1%
Transportation
3
3%
Wholesale
4
4%
TOTAL
211
Skipped
40
100%
Category Micro (<=10) Small (11-50) Medium (51-100) Large (101 or more) Total Skipped
Manufacturing and
Responses 42 38 11 20 111 15
Percent 38% 34% 10% 18%
Responses from small and medium size businesses made the majority (73%) of the survey. NUMBER OF RESPONDENTS There were 126 responses to the Business Outlook 2015 Q3 compared to 251 during 2015 Q2.
Survey Responses 300
251
200 100
126 56
0 2015Q1
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2015Q2
2015Q3
Business Outlook 2015 Q3
General Business Confidence 2015Q3 A1.1: With regard to the Barbados Economy, do you believe that General Business Conditions in 3 months' time will have? Improved
generally felt more positive about general business conditions in 12 monthsâ&#x20AC;&#x2122; time than in the shorter term. Whilst the percentage who believes conditions will deteriorate is
10%
Deteriorated
fairly steady around 40% for all three outlook
40%
Remained the same
periods, a larger number of respondents 28%
51% 0%
For the third straight quarter, respondents
20%
40%
60%
believe business conditions will improve over 80% 100%
the next 12 months when compared to the next 3 months (10%). These shorter terms metrics donâ&#x20AC;&#x2122;t provide
2015Q3 A1.2: With regard to the Barbados Economy, do you believe that General Business Conditions in 6 months' time will have? Improved
will likely be robust for the remainder of 2015. As a result, business confidence levels range from low with regards over the next 3-6
14%
months to negatively balanced over the
Deteriorated
42%
Remained the same
44% 0%
the business signals that economic growth
20%
40%
60%
next 12 months. We are almost at the point where some 80% 100%
Net balance (%): -28% Confidence: LOW 2015Q3 A1.3: With regard to the Barbados Economy, do you believe that General Business Conditions in 12 months' time will have?
validation of the expectations for general business conditions can be conducted. This type of data validation could assist us with determining how realistic the longer term (12-month) business outlook is vis-Ă -vis the shorter term (3-month). In short, we should be able to decipher whether the forward
Improved
28%
Deteriorated
looking optimism is consistent with actual business performance.
43%
Remained the same
29% 0%
20%
40%
60%
80% 100%
Net balance (%): -15% Confidence: BALANCED
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Business Outlook 2015 Q3
Respondents were not very positive with
Economic Indicators 2015Q3 A3.1: How do you expected the Unemployment Rate to have changed in 12 months' time?
20%
12
months. low
commenced.
40%
60%
80%
(69%)
expect
the
unemployment rate to increase over the
remained
20% 0%
two-thirds
Overall
confidence
amongst respondent for this indicator has
69%
Increased Remained the same
over next
11%
Decreased
their expectations for employment as just
100%
Net balance (%): -58% Confidence: LOW
since
this
There
is
survey clearly
has more
optimism
regarding
general
business
conditions
over
next
months,
the
12
however, if these sentiments hold true then the economy is likely to experience jobless growth.
2015Q3 A3.2: How do you expected Interest Rates on Loans to have changed in 12 months' time?
Decreased
21%
Increased
21%
Despite
40%
60%
80%
100%
indicator is negatively balanced.
Similarly, 52% of respondents felt that interest rates
Remained the same
overdrafts
will
remained
that these rates on overdraft will increase. The overall confidence indicator is therefore
52% 40%
on
unchanged in 12 monthsâ&#x20AC;&#x2122; time. 32% also felt
32%
20%
an expectation that interest rates on loans response level. Overall, the confidence
16%
0%
12 monthsâ&#x20AC;&#x2122; time. Further, some 21% indicate will rise, this is 7% lower than the 2015 Q2
2015Q3 A3.3: How do you expected Interest Rates on Overdrafts to have changed in 12 months' time?
Increased
the
interest rates on loans would not change in
Net balance (%): -1% Confidence: BALANCED
Decreased
of
a majority of respondents (58%) felt that 58%
20%
announcement
liberalization of interest rates on April 7, 2015,
Remained the same 0%
the
60%
80%
100%
characterized as negatively balanced.
Net balance (%): -16% Confidence: BALANCED
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Business Outlook 2015 Q3
Firm Level Confidence
One-third of respondents expect their firm’s real business activity to increase over the next 12 months whilst nearly 41% expect this
2015Q3 B1: With regard to Your Business, how do you expect Real Business Activity to have changed in 12 months' time? Increased
indicator to remain the same. 1 out of every 4 is
25%
Remained the same 20%
40%
60%
40%
confidence
profits to decrease over the next 12 months. The confidence level for this indicator is negatively balanced. Though it is within the same range as the real business activity indicator, there is a 20 percentage point differential between indicators that may be somewhat counterintuitive.
45% 20%
balanced
respondents (34%) expects their firm’s real
34%
0%
positively
With respect to real profits, 1 out of every 3
21%
Remained the same
a
time period.
100%
2015Q3 B2: With regard to Your Business, how do you expect Real Profits to have changed in 12 months' time?
Decreased
real
business conditions indicator for the same 80%
Net balance (%): +8% Confidence: BALANCED
Increased
expects
indicator. This is consistent with general 41%
0%
however
business activity to decrease. The net effect
33%
Decreased
respondents
60%
Firm level expectations for employment
80% 100%
prospects over the next 12 months are
Ne t bal ance ( %) : - 12% Confi de nce : BALANCED
bearish as some 26% expect their staffing levels to be reduced. Approximately 18% of those expecting to their firm’s employment
2015Q3 B3: With regard to Your Business, how do you expect Employment to have changed in 12 months' time?
levels to decline in the next 12 month were BCCI members. The negatively balanced confidence rating for this indicator is an
Increased
improvement from the previous quarter
12%
Decreased
when the statistic was classified as low with
26%
Remained the same
63% 0%
20%
40%
60%
80% 100%
Net balance (%): -14% Confidence: BALANCED
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an estimated value of -25%. Notably, 63% of
respondents
indicated
their
firm
is
expected to maintain the same level of employment over the next 12 months which is a very good sign since it up 20% from 2015 Q2.
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Business Outlook 2015 Q3
Firm level Confidence
There were 54 responses to the question related to the holding of inventories over the
2015Q3 B10: With regard to Your Business, how do you expect Inventories to have changed in 6 months' time? Increased
next 6 months. The level of confidence in this area was both positively balanced as shown in the chart. When asked about the next 3 months, the over indicator was
37%
negatively balanced (-15%). Decreased
26%
Remained the same
their inventory levels would increase in 6
37% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Net balance (%): +11% Confidence: BALANCED 2015Q3 B11: If your business is involved in Construction, how do you expect your Volume of activity for Residential Building to have changed in 12 months' time? Increased
44%
Decreased
For businesses involved in construction, there were 16 responses. Almost 50% expected residential construction to increase over the next 12 months. In the previous quarter, only 22% felt there would be an increase in this category of activity though on a larger number of responses. The net balance statistic for indicator was moderate which is activity in the country if it materializes.
38% 0%
months’ time relative to in 3 months’ time.
a good sign for the recovery of construction
19%
Remained the same
Of note
however, was that more respondents felt
20% 40% 60% 80% 100%
Net balance (%): +25% Confidence: MODERATE 2015Q3 B13: Will it be easier or harder to get credit in 12 months' time?
In spite the deregulation of monetary policy with respect to interest rates on deposits, only 14% of respondents felt it would be easier to get credit in 12 months’ time. 51% felt it would be harder whilst 35% thought access to credit would be the same. The
Easier
14%
net balance statistic means that the overall
Harder
51%
Remained the same
35%
confidence level for this important indicator is low.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Net balance (%): -37% Confidence: LOW
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Business Outlook 2015 Q3
Business Performance (last 6 months)
Business Performance (next 6 months)
2015Q3 C1: How has your business performed over the LAST 6 months relative to the previous 6 months? Much stronger
2015Q3 C2: How do you believe your business will perform in the NEXT 6 months compared with the last 6 months?
2%
Somewhat stronger
Much stronger 17%
Somewhat stronger
About the same
44%
Somewhat weaker
24%
About the same
28%
Much weaker
3%
52%
Somewhat weaker Much weaker
9%
17% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Net balance (%): +6% Confidence: BALANCED
Net balance (%): -18% 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 which has not changed
perform stronger than the last 6 months by a
from the previous quarter. In 2015 Q2,
margin of 6% compared to those that
business performance estimates were better
believe their businesses will perform weaker.
than
more
In 2015 Q2 the same margin was 17%.
executives indicated experiencing stronger
Compared to 36% in 2015 Q2, 27% of
business performances, 26% versus only 19%
respondents now anticipate an improved
currently.
business performance over the next 6
in
the
current
quarter
as
The confidence level for the current period
months.
is negatively balanced as more firms (37%)
This net balance statistic for this quarter is still
indicated registering a weaker performance
a positively balanced level of confidence
in the last 6 months than those that had a
and perhaps represents some green shoots
better outturn (19%) when compared to the
of growth looking ahead. Small and micro
previous 6 months.
businesses being more optimistic in the short term is a good signal. Some caution must be taken as both business
performance
metrics
have
declined since the last quarter.
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Business Outlook 2015 Q3
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
Rank
National economic performance
85
67%
1
Rising overheads and utility costs
49
39%
2
Price pressure from customers
48
38%
3
Price pressure from competitors Problems with government planning regulations
41
33%
4
38
30%
5
Declining customer base
33
26%
6
Licensing and regulations
30
24%
7
Regional economic performance
29
23%
8
Global economic performance
25
20%
9
Rising production costs
24
19%
10
Increased competition from low cost imports
22
17%
11
Difficulties in obtaining finance / extending credit facilities
21
17%
12
Price pressure from suppliers
20
16%
13
Availability of skilled workers
17
13%
14
Rising transport costs
16
13%
15
Declining visitor numbers
12
10%
16
Broadband and information technology access
7
6%
17
Transport infrastructure Environmental catastrophes (hurricanes, flooding, earthquakes etc.)
6
5%
18
4
3%
19
Reduced demand for exports
4
3%
19
Access to training Limited supply of production materials and/or product
3
2%
21
2
2%
22
Shortage of commercial land Declining demand from customers
2
2%
22
0
0%
24
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Business Outlook 2015 Q3
Feedback The following is a selection of comments provided by respondents on general issues affecting businesses in Barbados.
Increase Port Taxes, Length of time documents are processed through Customs, Length of time Goods are cleared from the Port.
Length of
time payment is made by Debtors.
Unchallenged accusations of serious corruption within
cabinet
are
harming
Barbados'
reputation. It is also making many Barbadians lose faith in the system and this is harming longer term investment.
The economy need stimulating, small, medium
The
and large, Government seems to be interested
affecting our business negatively. We depend
current
industrial
in only large projects.
on imports and any negative movement in that area affects us.
relations
climate
is
This has resulted in the
company missing vital opportunities to sell Lack of confidence in Government policies. Regulation,
taxes
implemented stakeholders
and
without i.e.
solid
policies
that
discussion waste
tipping
product as we canâ&#x20AC;&#x2122;t sell what is still in the Port.
are with fee,
renewable energy regulations, changes in VAT etc.
Government contracts are the largest accounts receivable
which
banks
do
not
consider
collectible. These accounts receivables are taken out of the bottom line when applying for
There needs to be greater linkages between businesses in the agriculture and retail and tourism businesses.
finance.
owed to a small agro business- and no one in the BRA even has the decency to reply to correspondence. Inputs for hi tech agriculture are subject to VAT and in many cases tax because of their specialty nature which fall Classical
companies
with
cash tied. The whole system is grinding to a halt.
collect VAT as we are zero rated over 300k
the
private
slower at paying their debts as they become
No VAT returns since 2011 while we cannot
outside
Thus
Government contracts are getting slower and
agricultural
box.
Iâ&#x20AC;&#x2122;m
The BCCI needs to keep pressing the point to Gov't
that
with
business
development
&
expansion generates the tax revenue that they so desperately need. Continual increasing of taxes on an already overburdened society with increasing
unemployment
is
myopic
and
unsustainable.
seriously viewing options to close the company at the end of 2015.
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Business Outlook 2015 Q3
Economic Analysis The latest results of the Business Outlook 2015 Q3 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 climate with some
Business Confidence 0%
-5% -7% -10%
-10%
-15% -16% -20%
-25% 2015 Q1
degree of confidence.
2015 Q2
2015 Q3
The overall business confidence for 2015 Q3 is still negatively
balanced and estimated at -7%, compared to -16% and -10% during 2015 Q1 and 2015 Q2 respectively. Of the 21 indicators which the net balance statistic is calculated, 9 registered positive measures of confidence which are as follows:
Real business activity in 12 months’ time (+8%)
Price of good/service in 3 months’ time (+12%)
Investment in buildings, plant and equipment in 12 months’ time (+2%)
Real exports in 12 months’ time (+26%)
Capacity Utilization in 3 months’ time (+4%)
Inventories in 6 months’ time (+11%)
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Business Outlook 2015 Q3
Volume of activity in residential construction in 12 months’ time (+25%)
Volume of activity in non-residential construction in 12 months’ time (+12%)
Business Performance over the next 6 months (+6%)
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
months’ time, whilst 21% expect rates of loans to decrease. Some 86% also expected that it’ll be harder to access credit in 12 months’ time (44%) whilst 42% expected access to remain the same. On the bright 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. Following the presentation of the Budgetary Proposals and Financial Statement in June 2015, there will likely be a negative impact on the cash flow of some business segments as there will need to be an outlay of cash in order to remain tax compliant. Despite having a better outlook over the next 12 months, shorter term challenges may well prove difficult in finding available cash to settle new tax bills and will likely dampen new investment require to maintain or expand business activity.
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Business Outlook 2015 Q3
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.
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Business Outlook 2015 Q3