British Businesses remain Confident in face of Challenges

Posted on 15 July, 2014 by Kirsten Kennedy

As the UK recovery continues to gather momentum, confidence amongst businesses has reached a level not seen since before the recession hit in 2008. This has led to huge investment into almost every sector of the economy, with two different studies demonstrating how this upbeat attitude towards growth has benefited the country as a whole.

British-Businesses-remain-Confident-in-face-of-Challenges

British businesses have demonstrated a higher level of confidence than any other leading economy internationally according to the latest poll from Markit. The survey, which assesses the performance of 11,000 global businesses, put the UK ahead of powerful economies such as the US, Germany, Japan and China in the second quarter in terms of confidence.

Although Brazil demonstrated a higher level of optimism, experts believe that this result is something of an anomaly due to the economic benefits brought about by the World Cup. As such, the UK remains the “stand-out performer” despite the fact confidence levels have fallen slightly since February’s record high result.

Chief economist at Markit, Chris Williamson, believes that British businesses are taking a realistic approach to the challenges facing them, hence the slight dip in confidence since the first quarter.

He says; “Optimism has cooled slightly since earlier in the year reflecting numerous worries, including higher interest rates, a strengthening of sterling, uncertainty due to the general election, an ongoing lack of bank lending, skill shortages and rising staff costs.

“The overall picture remains one of recoveries being sustained, which is reassuring given the many threats cited by companies in the survey.”

The report will come as a relief to many firms, as economists were concerned about the sustainability of the UK’s recovery due to the predicted rise in interest rates later this year. Fortunately, it seems that the UK will reach a point of “escape velocity” – the term used to describe the point at which recoveries become self-sustaining.

Another survey which indicates that this position has almost been reached is the latest regional growth survey from Lloyds Bank. According to the group’s regional purchasing managers’ index, business activity in the North East reached 64.8 last month, which is well above the 50 level dividing growth from contraction.

The UK average remains stable at 58, with London’s reading easing to a five month low of 58.4. This, if anything, is proof that regional areas are managing to attract investment, alleviating fears that the UK’s recovery revolves solely around market activity in the capital.

The survey also demonstrated continuing employment growth in regional areas throughout the UK. Employment levels climbed at the fastest pace since 2001 during June, hinting that the national employment rate will continue to drop as the year progresses.

Director of SME and mid-markets banking at Lloyds, Tim Hinton, says; “June’s survey rounds off a strong second quarter for both manufacturing and services companies with an encouraging rise in employment levels.

“Efforts to boost investment spending indicate businesses are increasingly confident conditions will continue to improve in the second half of the year.”




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