UK to avoid triple dip recession, says ICAEW

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The UK will avoid a triple-dip recession with business confidence the highest in two years

This is according to the latest Business Confidence Monitor from ICAEW and Grant Thornton, which suggests that growth will resume this quarter. This quarter’s findings suggest that GDP will grow by 0.4% in Q1, having seen a significant boost since the last quarterly survey at the end of 2012.

Companies on average reported an increase in turnover of 3.3% in the past 12 months, and expect a rise of 4.6% in the year ahead. Similarly profits grew by 2.5% in the past 12 months and are expected to grow by 3.9% in 2013. Although below the pre-crisis averages (of 6.5% reported turnover growth and 5.3% reported profit growth), expectations are more optimistic than they have been in recent quarters.

The survey also concluded that businesses are still cautious to invest in the recovery, highlighted by continued low capital investment and salary growth.

Michael Izza, chief executive of ICAEW, said, “There was a risk that, combined with the traditional January blues, the bad weather and some high profile retail collapses, talk of a triple dip recession could become self-fulfilling. These results show that we are set to avoid a third period of technical recession, but no one should be complacent. There is only one way out of our economic malaise, and that’s to increase our economic output. Such a task isn’t going to be easy, or indeed quick.”

There was positive news for the labour market too, with firms increasing their staff by 1% in the last year, and plans to increase headcount by another 1.5% over the next 12 months.

However, the availability of management skills is a concern as companies look to increase headcount – leading to a fear that the right people will not be in place when the recovery starts.

Grant Thornton CEO Scott Barnes said, “Export growth rose slightly this quarter as the global economy picked up. This could be a sign that the export-led recovery we need may be beginning. This is coupled with an improvement in both profit and turnover growth, which companies expect to increase in the year ahead. Despite a rise in confidence though, companies’ modest plans for capital investment are a worry as this is crucial to a strong and sustained recovery.”

Optimism was highest in the South East and Wales. Sector-wise, the IT, communications and construction sectors recorded the highest levels of confidence.

Helen Roxburgh

 

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