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Economic cheer at its highest level for two years as 2010 marks turning point

ECONOMIC optimism is at its highest level for two years according to a business trends report, published yesterday, by accountants and business advisers BDO.

The Business Trends output index was up significantly to 99.7 in December from 96.3 in November –?the biggest rise since the end of the early 90s recession.

The sharp increase was driven by the optimism index which rose to 100.5 from 96.3 in November.

Cumulatively, the indices could mean a 2.5 per cent growth rate for the UK in the first quarter of 2010, according to BDO.

“The marked increase in output and optimism suggests we are now on the brink of a sharp upturn,” said Peter Hemington, partner at BDO.

By August last year, the UK saw £4.6bn of GDP wiped out. But, the improved confidence in the New Year is expected to drive up production to replace the depleted stock.

However, Hemington warned the expected recovery may not be straightforward. “Restrained lending, a likely increase in taxes and the possible effect of political uncertainty on sterling could all hamper performance later on in the year. This means renewed optimism should be paired with a sense of caution. Credit conditions remain difficult, so businesses must seize opportunities to secure funding and monitor their cash-flow closely,” he said.