Confidence at three year high for UK firms

Confidence among UK businesses is at its highest for three years amid signs of the economy improving but the recovery remains on a knife edge

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Confidence among UK businesses is at its highest for three years amid signs of the economy improving but the recovery remains on a knife edge, according to a report today.

The ICAEW/Grant Thornton UK business confidence monitor (BCM) index stands at +24 in the current quarter of the year, up from +16.7 in the second quarter and the highest level since the second quarter of 2010.

The index also forecasts the economy to grow by 1% in the third quarter amid positive expectations for turnover, profits and job creation – though concerns remain over levels of investment.

The optimism follows figures last week showing a brightening picture from the construction and manufacturing sectors, adding to hopes that the UK economy can build on the growth seen in the first half of the year.

Today’s data showed that businesses expected turnover growth of 4.9% and profits to rise by 4.6% in the next year.

Companies were looking ahead with plans to increase staff numbers by 1.6% in the next 12 months, while wages were expected to grow 1.8%, according to the survey of chartered accountants for accountancy body ICAEW and Grant Thornton.

ICAEW chief executive Michael Izza, chief executive of ICAEW, said: “Confidence is at a high level, and with the economy expected to grow by 1.0% this quarter, businesses need to make the most of the environment to ensure that the recovery is consolidated.

“Currently, decisions such as where to invest are being made on a short term basis which explains why the strong figures for this quarter are being led by improvements in the housing sector and increased consumption by households. To get a stronger commitment from companies, and to ensure a broad-based recovery has solid foundations, the government must continue to ensure the business environment remains conducive to growth.”

Grant Thornton UK LLP CEO, Scott Barnes said: “The business environment is starting to look far more stable than we have seen in previous quarters and companies are feeling confident enough to improve their employment expectations, reinforcing the suggestion that the private sector remains willing to create jobs.

“However, there is still cause to be concerned.”

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