Recession kicked into long grass as UK steams ahead of Europe and US
A recession hitting the UK economy is looking like an increasingly far flung prospect after yet more data today shows businesses and families are fending off the cost of living crunch.
A net balance of 43 per cent of UK businesses are buoyant about the economy over the coming year, the highest level in a year, according to research firm S&P Global and consultancy Accenture.
The level also rose sharply 18 per cent from October.
The survey indicates economists’ bets on Britain falling behind its European and cross-Atlantic partners and slipping into recession this year may be overblown.
Business confidence in Europe was a net 23 per cent, nearly half the level recorded in the UK, while in the US, confidence hit 32 per cent.
Experts at the turn of the year warned Britain was on track to suffer the longest recession in a century that would wipe around three per cent off of GDP.
But a batch of numbers out in the past couple months have signalled that families and businesses are still spending and are holding up well amid the cost of living crisis.
Figures from the Office for National Statistics last week revealed output grew 0.3 per cent in January, much better than the 0.1 per cent forecast by City economists.
Inflation has dropped for three straight months, although it is still in the double digits, while the purchasing managers’ indexes have returned to growth territory.
Separate figures out today from consultancy BDO today also show output is rising at the quickest pace since January 2022.
As a result, “the anticipated recession now set to be milder than previously feared,” the organisation said.
Matt Prebble, strategy and Consulting Lead for Accenture in the UK and Ireland, said: “The renewed optimism among UK businesses once again demonstrates their resilience in the face of economic uncertainty.”
Jeremy Hunt is readying what is expected to be a ‘placeholder’ budget on Wednesday in which little tax and spending announcements will be launched.
Better than feared economic growth will boost the Chancellor’s capacity to support firms by lifting tax revenues.
Estimates from think tanks the Institute for Fiscal Studies and Resolution Foundation indicate the Chancellor has around £9bn to spend next week.
He is reportedly mulling watering down and extending the 130 per cent super deduction to soothe the impact of corporation tax rising to 25 per cent from 19 per cent.
Over the weekend, Hunt announced a series of measures to be included in the budget that are designed to strengthen the workforce, which has been knocked by around 900,000 people leaving it since the start of the pandemic.
Swelling costs, primarily caused by energy bills skyrocketing after Russia’s invasion of Ukraine and higher wages, are crimping companies’ margins.
“As they strive to tackle economic headwinds and drive growth once more, businesses will need a helping hand from the government in Wednesday’s Spring Budget to continue creating jobs and economic opportunities for communities across the country,” Ed Dwan, partner at BDO, said.