| Confidence at Black Wednesday low |
|
|
| Written by Adrie van der Luijt | |
| Wednesday, 02 July 2008 | |
|
UK business confidence has plummeted to its lowest level since 1992.
The latest report from accountants and business advisers BDO Stoy Hayward reflects the deepening impact of the credit crunch and rising food and energy prices. The Business Trends report, which pulls together the results all of the main business surveys, reveals a bleak short-term view for UK businesses. The Output Index, which measures business confidence over the next quarter, declined to 97.7 in June from 98.3 in May, the lowest level since 1992. This indicates economic growth at an annualised rate of 1.3 per cent over the next quarter. This falls considerably below that of the Chancellor’s current forecast for growth between 1.75 per cent and 2.25 per cent in 2008. Short-term optimism eroding Short-term confidence for both small and large companies is equally unstable, with both suffering falls in the report’s Output Index this month. The Index score for small businesses fell from 96.6 in May to 96.0 in June. The Index for large businesses fell from 99.6 in May to 99.0 in June. The picture is similar for the service sector and the manufacturing sector which both show a decrease in short-term confidence. The service sector now has an Index score of 97.8 down from 98.4 in May, whilst the manufacturing sector is also struggling, falling from 97.6 in May to 97.0 in June. No sign of cooling inflation The Inflation Index for June is unchanged at 115.6, the second highest level since the report began, indicating that businesses expect prices to rise at a rapid pace over the next quarter. The index score implies that inflation is expected to grow at an annualised rate of 4.2 per cent over the next quarter. Peter Hemington, partner at BDO Stoy Hayward, said that short term business confidence has not plunged this low since Black Wednesday in 1992, indicating that UK businesses of all shapes and sizes are struggling to see any light at the end of the tunnel. He warned that with confidence at a 16 year low, an interest rate rise next week aimed at curbing inflation could be crippling for business and could worsen the effects of the economic slowdown. “Our figures suggest that the MPC will be left with little choice next week other than to leave interest rates unchanged,” Hemington concluded. Related articles
Related links |
Subscribe to our weekly newsletter for top jobs, news and more 
Digg it! 
del.icio.us 
Newsvine 
Reddit 
Stumble It! 
As the economy hits the most significant downward cycle in 50 years, finance directors must take stock of their companies' remuneration and compensation packages.