UK may avoid triple-dip recession as business confidence rises

The UK looks set to avoid a triple-dip recession, according to the latest Institute of Chartered Accountants for England and Wales (ICAEW)/Grant Thornton UK Business Confidence Monitor (BCM). It reports that business confidence is at its highest since Q2 2011, and suggests that growth will resume this quarter.

Michael Izza, Chief Executive of ICAEW, says there was a risk that, combined with the traditional January blues, the bad weather and some high-profile retail collapses, talk of a triple-dip recession could become self-fulfilling: “These results show that we are set to avoid a third period of technical recession, but no-one should be complacent. There is only one way out of our economic malaise, and that’s to increase our economic output. Such a task isn’t going to be easy, or indeed quick.”

There is continuing good news for the labour market as private sector recruitment increases, as do hiring expectations for the next 12 months. Firms have seen a one percent increase in staff in the last year and plan to increase headcount by 1.5 percent over the next 12 months. One in 10 firms say the availability of management skills is a greater challenge than a year ago, suggesting that companies may struggle to recruit the right people to lead the recovery.

Companies reported an increase in turnover of 3.3 percent in the past 12 months, and expect a rise of 4.6 percent in the year ahead. Similarly profits grew by 2.5 percent in the past 12 months and are expected to grow by 3.9 percent in 2013. Although below the pre-crisis averages, of 6.5 percent reported turnover growth and 5.3 percent reported profit growth, expectations are more optimistic than they have been in recent quarters.

Confidence is positive across all regions with the southeast and Wales among the most optimistic. Businesses in all sectors also reported a positive trend with IT and communications and construction recording the highest confidence indexes.