FIGHTING THE RECESSION: UK business confidence at a 13-month high

As the business environment in the United Kingdom fights off the effects of a triple-dip recession and an all-time low in consumer confidence, and as higher costs/rents and falling sales are killing off many businesses big and small, there is a small whiff of hope. At least if a report recently published by a firm of business advisors and accountants is to be believed.

English: Logotipo de la compañía BDO
English: Logotipo de la compañía BDO (Photo credit: Wikipedia)

According to the report, produced by BDO, confidence among British businesses is at its highest in just over a year, based on an evaluation using BDO’s own “Optimism Index” which has risen higher for the fifth consecutive month in June 2013.  Figures released by BBC indicated that the Optimum Index, a predictive indicator looking at business performance six months ahead, showed a rise from 93.6 to 94.3, which is a 13-month high. Additionally, the company’s Output Index, which measures sales volume predictions in the next few months, also showed an increase. The Index rose from 94.4 in May to 94.9 last month. Despite being an obvious improvement, the figures fall slightly on the wrong side of growth rates. Growth is indicated by figures of 95.0 and above.

BDO’s report states that the spike in business confidence has been at its highest among firms in the manufacturing and services sectors, despite the British manufacturing industry having been nearly decimated by competition from cheaper markets and lower manufacturing costs abroad, particularly in the emerging superpowers of India and China.

Despite these fresh shoots, BDO also warned in its report that recovering markets are still experiencing volatility particularly in the Eurozone (European countries with the euro as their currency). This has joined forces with declined spending by U.K. customers being held down by stalled wages and the Government’s widely reviled austerity cuts, and moves by the United States Federal Reserve to wind down its program of stimulus measures for ailing businesses across the Atlantic. Figures released by the agency show that growth has been slower than expected and have actually been underperforming. BDO has advised its business clients not to acquire false hopes of a total financial recovery in the interim.

English: The City of London skyline as viewed ...
English: The City of London skyline  (Photo credit: Wikipedia)

Peter Hemington, a partner at BDO, said in an interview with the BBC  “While it’s encouraging to see confidence continuing to improve, we should be mindful of the zig-zag trend that has characterised UK business confidence since 2008.”

“Periods of improved confidence have ended before growth has really begun to get going.

While BDO’s figures do make optimistic reading for British businesses, the stark reality of post-recession life has still made life difficult for business and consumer alike with even Government departments forecasting job losses in the public sector running into the tens of thousands. In a stark trading atmosphere, while any positive news is to be welcomed, the see-saw demeanour of UK economics and the fickle nature of customer spending, coupled with financially crippling austerity measures enacted by governments across Europe, means that UK plc is not quite out of the woods yet. The tough times are far from over.

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SOURCES:
Vijay Shah on Twitter LINK 
Casey on Twitter LINK 
“UK business confidence reaches 13-month high” – BBC News Business (8 July 2013) LINK 

 

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