Infinity International aim to provide content to our clients on several relevant topics covering a variety of possible concerns during these unprecedented times. To do this, we are drawing on our own experience, client feedback as well as the input from others in our network.
Last month we introduced a monthly survey, Infinity International Client Sentiment, this measure a cross section of our clients, from different industry verticals, to gauge their experiences regarding current business conditions. An index score is then formulated from the data provided. The scoring is 0-100, with 100 being the most positive. The aim of the index is to determine the following points:
- Emotional mindset of businesses
- To understand the strength of order books
- Plans for investment and employment in the short term
- Any expectations to change price strategies
By running the survey on a monthly basis during these unprecedented times, we aim to track how business sentiment is changing amongst our clients (a good cross section of UK PLC) against the COVID-19 backdrop.
The score for our first survey, and for the month of April was 44.28, after completing this month’s survey we have arrived at a score of 46.84, resulting in a sentiment increase of 2.55 points.
Our survey asked 7 simple questions to determine the above points and produce the score.
The questions and results were as follows:
1. Overall, would you describe current conditions for your business as good, middling, or bad?
Last month 51% of respondents said that they consider business conditions as ‘bad’ with the figure improving by 19% this month. May has seen a sentiment increase of 12% towards a middling view on current business conditions, while respondents expressed a 6.9% increase in sentiment towards current conditions being described as good.
Let us start with the positive, those feeling business conditions are “good” have increased and “bad” decreased. However, “middling” has also increased which may represent the tentative green shoots that are starting to appear. The overall tone is an improvement which may be due to supply chains starting to flow more easily as China relaxed lockdown. In addition, sentiment surrounding the lightening of UK lockdown restrictions as well as garden centres and DIY stores reopening.
2. In the next 12 months, do you expect your business’s revenue to increase, stay the same, or decrease?
Last month 24% of respondent expected business revenue to stay the same, this remains a consistent sentiment into May, however the attitudes towards decrease and increase have had a marked change, 3.6% fewer respondent are anticipating a decrease in revenue, while 3.4% of respondents sentiment moved towards a positive result.
This may be due to the signposting from the government of its phased exit strategy. However, with only a small improvement it does show that business is still tentative which could be due to the unknowns of emerging consumer confidence or indeed the potential for a second wave.
3. In the next 12 months, do you expect your business’s staff of full-time employees to increase, stay the same, or decrease?
Last month 65% of respondents expect their staffing levels to stay the same, with the figure now at 69% a month later the trend is fairly consistent. The major difference in May is the 6% reduction in confidence towards increased full-time staff.
This is maybe due to the government extending its furlough timeline to October and its signposting of the roadmap to easing restrictions.
4. In the next 12 months, do you expect your prices to increase, stay the same, or decrease?
In this question we can see a marked change in sentiment results month-on-month with regards to pricing expectations, the “stay the same” attitude has dropped by close to 7%, reallocating itself between those expecting a price decrease, which has risen by 2% and those expecting an increase in pricing which is up by 4.6%.
Anticipated price increases could be a precursor to inflation. This may in part be due to a weak British Pound. However, an additional factor could be the cost to businesses in implementing social distancing in the workplace or retail spaces to adhere to government guidelines.
5. In the next 12 months, do you expect investment in sales and marketing to increase, stay the same, or decrease?
This month we notice a 3% reduction in confidence to increase investment in sales and marketing. Those planning to ’stay the same’ have increased by 2% this month. With the attitude towards a decrease in investment moving up by less than 1%.
One might have expected to see a larger response towards “decrease” in investing in sales and marketing. This may have stayed static due to the unknowns of the environment moving forward.
6. In the next 12 months, do you expect foreign exchange volatility to have a negative effect, no effect, or a positive effect on your business?
The general sentiment towards currency volatility impact remains negative with a 2.5% increase in “negative effect” sentiment over Aprils results, this is balanced by the decreased sentiment towards the “positive” view which has dropped by 3.5%.
The growth in the “negative” effect coincides with the increase in talks of negative interest rates from the UK with the BoE not ruling out the possibility. In addition, the possibility of a cliff face event in UK/EU trade talks has also been a talking point. This was reflected in comments from Commerzbank who stipulated that their outlook for a Pound-to-Euro is to fall to 1.02, around -8.5% downside from opening levels on 24/05/20.
7. In the next 12 months, do you expect your foreign exchange turnover to increase, stay the same, or decrease?
FX flows are broadly expected to remain the same or decrease month on month. This month the sentiment towards an “increase” in FX turnover is up 1.6%.
As mentioned, we have seen a small increase in a sentiment increase of 2.55 from 44.28 in April to a reading in May 46.84. Albeit this is a small move, but it is a move in the right direction. The tentativeness is likely due to the government’s conditional signposting and that the UK (and indeed the world) is continuing to sail into uncharted waters. Restrictions are slowly being relaxed but we are still some distance from “business as usual” and the tentative sentiment reflects this. However, with that said, we are starting to see business conditions improve for now and it may be a sensible time to re-assess some of your hedging requirements.
We will be releasing a piece of content titled “Points to consider before FX hedging in COVID 19 conditions” within the next week. Please feel free to reach out to us to discuss.
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This blog post is intended to provide you with information on the services Infinity International Limited (IIFX) offer and should not be interpreted as advice or as a solicitation to offer to buy or sell any currency or as a recommendation to trade. Foreign exchange rates provided therein are for indicative purposes only and are not intended to give an accurate reflection of current currency exchange rates or to predict future movements in currency exchange rates. IIFX is a company registered in England with registered number 06333730 and registered address at Third Floor, 24 Chiswell Street, London, United Kingdom, EC1Y 4YX. IIFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2017 (FRN: 567835) for the provision of payment services. IIFX is authorised and regulated by the Financial Conduct Authority in the conduct of designated investment business (FRN: 671108).