Fears grow of dip: Deloitte
CONFIDENCE among City finance chiefs began to wane again over the second quarter of the year as market volatility, global fiscal tightening measures and the sovereign debt crisis weighed heavily on sentiment.
Chief financial officers now predict around a 38 per cent chance of a “double dip” recession on average, a significant jump on the 33 per cent average chance predicted in the first quarter of the year, according to a Deloitte survey published today.
Optimism among the CFOs surveyed plunged to a 12-month low, with the balance of respondents reporting a more optimistic outlook on their company’s finances this quarter than last quarter falling from 40 per cent to just 24 per cent.
The findings come after the FTSE 100 experienced its worst week in two months, plunging over 4 per cent in the past five days.
However, economists paint a less bleak picture of the economy, with few appearing so bearish on the prospects for a double dip as company finance directors.
Ian Stewart, chief economist at Deloitte, which conducted the survey, said he would be more optimistic.
“I’d perhaps go for a chance of around 20 per cent that the UK will enter a double dip recession,” Stewart said. “Monetary policy is very loose and a big sterling devaluation is starting to kick in, while outside of Europe, the global economy is starting to show signs of quite a strong recovery. Policymakers are very aware of the downside risks and if there looks to be a serious renewal of the recession on the cards, they are prepared to lean very heavily against it.”
Peter Westaway, chief European economist at Nomura, also struck a more positive note. “There is clearly a big risk of a double dip given the severity of the Budget,” he said. “However, I think we will start to see a gradual recovery, particularly given the stimulus of long-term low interest rates, improving data and the fact the Budget has at least removed concerns over the UK being stripped of its AAA credit rating.”