Firms’ spirits up on hopes of 2013 recovery

Ben Southwood
Follow Ben
BUSINESS sentiment improved in the first month of the new year, as firms bet the UK could put decline behind it and dodge a triple-dip recession.

Confidence hit an 18-month high in January, according to Lloyds Bank’s business barometer, out this morning, with 46 per cent more firms saying their trading prospects would improve than saying they would get worse, up from December’s 40 per cent margin.

And three other data releases echoed Lloyds’ findings. The Confederation of British Industry’s (CBI) small and medium enterprise trend survey, also out this morning, said a nine per cent majority of small firms were expecting new orders to grow over the coming three months.

A seven per cent majority of the CBI’s respondents said output would rise in the coming quarter, bouncing back from the decline suffered during the the three months to January.

And the ICAEW/Grant Thornton business confidence monitor also suggested the UK would avoid the two consecutive quarters of contracting GDP that would signal the country was technically in a triple-dip recession. Their index rose from plus 4.2 in the last quarter of 2012 to hit 12.8 in the first quarter this year, which they say is consistent with 0.4 per cent GDP growth through this period.

Begbies Traynor’s data on financial distress also projected a more upbeat image of the economy. The fourth quarter of 2012 saw a 12 per cent plunge in the number of firms in financial distress, the data showed, with 196,636 firms registering significant or critical financial problems, down from 223,125 a quarter earlier.

But the embattled retail sector was much less optimistic. Like-for-like sales fell 0.4 per cent over the year to January, BDO said today, while overall sales fell some four per cent.

The cheery noise coming from business may have influenced the Institute of Economic Affairs’ shadow rate-setters, who recommended that policymakers hike rates 0.25 per cent, the first time in 16 months.