UK business confidence keeps rising

Business confidence is on the up, with IT the most confident sector, according to the latest study from the Institute of Chartered Accountants of England and Wales (ICAEW).

ICAEW’s UK Business Confidence Monitor (BCM) showed a ‘record’ rise in confidence, from -28.2 per cent to +4.8 per cent – the highest recorded since Q3 2007. Based on the results, the organisation predicts that GDP will rise 0.5 per cent this quarter.

Michael Izza, chief executive of the ICAEW, said: “This quarter’s BCM suggests that the UK recession is at an end. While there is no doubt the UK economy is on its way to recovery, we shouldn’t underestimate the challenges ahead for businesses.

“Businesses have taken the right actions to mitigate the impact of the downturn and are playing their part in an improving economy. Policies such as quantitative easing, the fall in interest rates and the VAT reduction have all helped improve business confidence. However, the recovery is very fragile and I would urge policymakers not to take any actions that could derail it.”

A total of 41 per cent of senior business professionals questioned were more confident of the economic prospects facing their business in the coming year. But just six per cent were more confident, which shows caution is still high about the strength and timing of the recovery.

The most confident sector was IT, registering a +18.5 per cent reading, followed by banking, finance and insurance (+15.9 per cent) and property (+11.7 per cent).

This is compared with the UK average of +4.8 per cent. The least confident sector is health and education (-12.2 per cent), which is facing the realisation of expected public sector cuts.

In terms of geography, business confidence rose across all regions for the second consecutive quarter. Wales was the most confident, with an index of +16.9 per cent, followed by Scotland at +15.9 per cent. Northern England is the most positive of the English regions, having seen a rise of more than 50 points. London and the South East are the most cautious (-1.1 and -0.6, respectively).

Izza added: “Although positive growth in the autumn seems more likely, there are concerns about the strength of the recovery. Salaries are expected to remain squeezed, and with no planned recruitment there is still an air of nervousness among UK businesses.

“Confidence is up, but those in manufacturing and engineering, as well as large businesses, remain cynical about their prospects for the future. Both are crucial to the UK economy and the signs are that the next 12 months are very much about building for the recovery.”