Business confidence at lowest point for 21 years

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Business confidence in the UK has fallen to its lowest point for 21 years, according to a new report from BDO

The figures also suggest a gloomy short-term outlook for the economy, with little growth expected in the first quarter of 2013, raising fears of a triple-dip recession.

BDO’s Optimism Index, which predicts business performance two quarters ahead, fell to 88.9 in January from a reading of 90.3 in December. This is the eighth consecutive month that the Index has remained below 95.0, the mark which indicates growth.

Last month the ONS reported that the economy shrank more than expected in the last quarter of 2012, as GDP fell 0.3% in the fourth quarter.

The economy had grown by 0.9% in the previous quarter, however, the rebound was largely driven by one-off factors, such as the Olympics.

The BDO report did show signs of life in the employment sector, with the Index rising to 95.1 in January from 93.0 in December. This means the survey passed the mark which indicates growth for the first time since April 2012, suggesting cautious optimism over taking on new staff.

There is also cause for optimism in the manufacturing sector, with a rise to 95.2 recorded in January from 91.9 the previous month.

Peter Hemington, partner at BDO, said, “In spite of a strengthening labour market, business confidence continues to weaken, and improved hiring intentions are not translating into growth plans. It seems the damaging effects on businesses of five years’ zigzagging economic growth has left them wary of making concrete plans for expansion and resigned to the ‘new normal’ of economic stagnation.

“To end this cycle, it is imperative that the government implements plans to expedite growth. Without growth incentives, we will continue to see UK businesses reluctant to invest and expand, which poses a grave threat to the UK’s economic recovery,” he added.

 

Raymond Doherty

 

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