Optimism about recovery is misguided, says report

The Bank of England&rsquo;s optimism about the UK&rsquo;s economic recovery is misguided, according to the latest Business Trends report from business advisors BDO Stoy Hayward. <br /><br />In its Quarterly Inflation report released earlier this month, the Bank of England reported that it expects the UK economy to grow by over 2.5 per cent by the end of next year and over four per cent by the end of 2011. The monetary authority reported that the quantitative easing and fiscal stimulus plans that the country has seen over the past year made a case for the up-beat predictions. <br /><br />But BDO says the Bank failed to take into account next year&rsquo;s fiscal tightening as the government tries to cut down its ballooning deficit. BDO&rsquo;s Output and Optimism Indices this month suggest that quarterly economic growth over the next six months will be below 0.5 per cent. This, it says will delay strong recovery until 2011. &ldquo;Moreover, business confidence is still fragile and, as our report shows, businesses do not expect a return to strong growth in the short term&rdquo;, said BDO partner Peter Hemington.<br /><br />The day after the BoE released its inflation report, economists said the numbers could be too optimistic. <br /><br />Hemington says the Pre Budget Report should avoid burdening businesses with aggressive tax increases.