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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

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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

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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.

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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

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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

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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

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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.

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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

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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.

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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%

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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!

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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%)

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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.

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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.

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Business Outlook 2015 Q2

Business Outlook 2015 Q2 Barbados  

Business confidence survey capturing the forward looking views of members of the business community in Barbados.

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