Business Confidence Falls Amid Recession Fears

06 February 2012 - Which Way to Pay

    



Business Confidence Falls Amid Recession Fears

Three separate reports today revealed that the UK’s one million small and medium-sized businesses were facing their most difficult year yet since the 2009 recession. The reports, which showed declining confidence across the sector and drops in lending to smaller firms, will only add to increasing fears about the state of the UK economy amid warnings of another recession.  The Institute of Chartered Accountants in England and Wales (ICAEW), who produced the UK Business Confidence Monitor index, stated that businesses will cut back on capital investment, holding back on capital spending as well as job creation. ICAEW said, “With the confidence Index pointing to a double-dip recession, the report gives little comfort to government as it seeks to drive growth in the UK economy.” Businesses are obviously responding to the gloomy economic outlook.

The Item Club, expects total bank business loans to contract by 2.2 % in 2012, with a 0.9 % growth forecast in 2013. This will not be welcomed news as bank lending is considered to be a crucial measure of economic health. A fall in lending could have serious consequences to businesses and the government definitely needs businesses to be growing. Chief executive at ICAEW, Michael Izza, said, “At the moment, it is hard to see where this growth will come from and the Chancellor needs to use the forthcoming budget to give businesses reasons to be more confident about the future – and unlock potential investments.”

The National Institute of Economic and Social Research argued that the government need to temporality ease its spending cuts to promote growth.  The reports will undoubtedly also put pressure on the Bank of England to pump an extra £50 billion into the economy to tackle the situation.  Shadow business secretary Chika Umunna said, “Businesses up and down the country are struggling because ministers are cutting spending and raising taxes too far and too fast, choking off growth before the effects of the Eurozone were brought to bear on the UK economy.”

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Related Links :
The Ernst & Young ITEM Club - Outlook for Financial Services
Related News - Fear Of UK Recession Eases
NIESR - Institue for Economic Research
ICAEW - Businesses remain cautious

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