Close

Business confidence and investment on the rise

POSTED: 3rd March 2014
IN: Business news
Share:

Businesses are more confident about their prospects than at any point in the last 22 years, with business investment set to make a positive contribution to growth in the coming months.

Businesses are more confident about their prospects than at any point in the last 22 years, with business investment set to make a positive contribution to growth in the coming months. undefined

Those are the key findings of two new studies, which suggest that the outlook for UK organisations is a positive one, particularly in the short term.

In the BDO's latest Business Trends report, which incorporates the results of the CBI Industrial Trends Survey, the Bank of England Agents' summary of business conditions, and the Markit/CIPS Manufacturing and Services PMI data, business optimism was revealed to be at its highest level since 1992.

The organisation's Optimism Index, which predicts business performance two quarters ahead, also revealed that sentiment about prospects continues to improve, particularly in the manufacturing and services sectors, the latter of which accounts for around three-quarters of the UK economy.

The improving optimism is having a direct impact on recruitment, with businesses' hiring expectations increasing markedly at the start of the year, stimulating hope of a sustained trend for UK job creation.

A key factor in the improvement appears to be low or negative business cost inflation, according to the BDO, which says this is helping firms to control costs.

The data is supported by the CBI's new Economic Forecast, which has predicted UK GDP growth of 2.6% this year - revised upwards from its estimate of 2.4% in November.

Stronger-than-expected economic performance in late 2013 is the key reason for the rise, with the CBI predicting that improving confidence among firms and low borrowing costs will see business investment growth expand from -3.7% last year to 6.6% in 2014.

CBI Director-General John Cridland said the forecast provides "encouraging signs" that business investment and net trade are "starting to play their part".

"More businesses are feeling inclined to invest in new technology and advertising. We can also expect to see more companies coming to market to raise finance and an uptick in merger and acquisitions activity as animal spirits return," he predicted.

Meanwhile, Peter Hemington, Partner at BDO, said his company's report indicates that the UK economy will expand rapidly in the first half of the year.

He explained: "Companies are raising headcounts in response to rising client demand and the data suggests that the unemployment rate is likely to fall below the Bank of England's 7.0% threshold for considering raising interest rates in the very near future."

The BDO now expects the country's sustained productivity to stimulate growth for the foreseeable future, though warned that this will eventually be tempered when the full impact of wage-related inflationary pressures is felt.

The content published on this website is intended to provide information only. The reader should seek advice from experts on the subject matter and independently verify the accuracy and relevance of any information provided here before relying upon it or using it for any reason. You can view our terms and conditions here.

Want to read more?

  • Business
  • SME
  • Article
  • Investors

Published: