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6 Sep 2013 10:30am

UK business cautious on recovery

British businesses are not convinced by George Osborne’s claim that the economy has moved “from rescue to recovery”

Almost half of businesses, 49%, disagreed with the chancellor compared to the 42% that agreed with him.

Disagreement with Osborne’s evaluation was most pronounced among smaller businesses, according to the latest Business Distress Index from R3, the insolvency trade body: 51% did not believe the economy had moved into the recovery phase.

The chancellor’s position has seemingly been boosted by a series of reports showing a slow but gathering optimism in recovery, predominantly driven by a strong services sector.

R3 president Liz Bingham says, “It’s important that we don’t forget that a lot of businesses, small businesses in particular, still feel they have significant hurdles to overcome. Now isn’t the time for complacency.

“Larger businesses may well be confident that they can ride out any remaining bumps on the road to recovery, but small businesses still face significant pressures, whether it’s access to finance or simply the pressures of growing demand.”

Despite the caution, the Index revealed reason for optimism. The number of businesses that reported one sign of distress – decreased profits, decreased sales volumes or falling market share – is down to 35%, from 40% in March, and 53% in June 2012.

In addition, 53% of businesses are reporting at least one sign of growth, up from 47% in March.

Once again larger businesses are reaping greater benefits, with 70% of them reporting at least one sign of growth, while 51% of small businesses reported the same.

Overall, 53% of businesses reported being more optimistic about the health of the economy, the highest level since this was first measured in 2011.

However, Bingham warns there is a “slight disconnect between businesses’ optimism about the economy and their optimism regarding their own situation”.

“While over half of businesses are optimistic about the economy, the number of businesses that believe their own activity will increase over the next year has yet to break through this 50% barrier.”

Raymond Doherty

 

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