UK firms look to more upbeat 2013 economy

Ben Southwood
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BUSINESS expects the UK’s bumpy economic ride to stabilise into growth during 2013, according to two surveys out this morning.

Company directors are far more optimistic than 12 months ago, according to a poll from the Institute of Directors (IoD). The number of directors who thought 2013 would be better than 2012 surged ahead of those with a pessimistic outlook by 31 percentage points. The result reverses the balance of minus 31 per cent in the same poll last year.

Despite the optimism, business leaders remain worried about the possibility of the recession turning into a triple-dip, with 65 per cent of respondents thinking there was a moderate or high risk of a renewed slump.

And company directors’ confidence in chancellor George Osborne, though still in positive territory, has fallen from 54 per cent at the time of the April 2011 Budget to just 11 per cent. Despite the drop, some 57 per cent of directors said he should stick with his deficit reduction policy. Just 19 per cent thought he should ease off, while only one per cent supported reversing austerity.

“The risk of a return to recession and a triple dip has not gone away, but it is receding fast, and expectations of growth are rising,” said chief IoD economist Graeme Leach.

Separately, Lloyds TSB’s business confidence index reported similar optimism. The index climbed to 19 per cent looking forward into 2013, up from 12 per cent in 2012, indicating that most firms expect sales, orders and profits to rise in the next six months. London firms were the most confident, with a net balance of 22 per cent giving positive responses, but all regions reported an overall positive outlook. Sectorally, even construction firms appeared upbeat, despite recent difficulties, and a balance of nine per cent of firms expected problems to ease in the coming six months.

However, Lloyds managing director David Oldfield warned that many firms were approaching hiring and big capital projects with a cautious eye, despite expected improvements, due to the perceived risks in the UK and world economy.