UK set to avoid triple-dip recession as business confidence rises

The key findings of the BCM Confidence Index for Q1 in 2013 stands at +12.8, up from +4.2 in Q4 2012, suggesting GDP will grow by 0.4 per cent in Q1 2013

The availability of management skills is a concern as companies look to increase headcount – leading to a fear that the right people will not be in place when the recovery starts.

Businesses are still cautious to invest in the recovery, highlighted by continued low capital investment and salary growth. Michael Izza, chief executive of ICAEW, said: “There was a risk that, combined with the traditional January blues, the bad weather and some high profile retail collapses, talk of a triple dip recession could become self-fulfilling. These results show that we are set to avoid a third period of technical recession, but no one should be complacent. There is only one way out of our economic malaise, and that’s to increase our economic output. Such a task isn’t going to be easy, or indeed quick.”

Grant Thornton UK LLP CEO, Scott Barnes said: “Export growth rose slightly this quarter as the global economy picked up. This could be a sign that the export-led recovery we need may be beginning. This is coupled with an improvement in both profit and turnover growth, which companies expect to increase in the year ahead. Despite a rise in confidence though, companies’ modest plans for capital investment are a worry as this is crucial to a strong and sustained recovery.”

Availability of management skills an issue
There is continuing good news for the labour market as private sector recruitment increases as do hiring expectations for the next 12 months.

Firms have seen a 1 per cent increase in staff in the last year and plan to increase headcount by 1.5 per cent over the next 12 months. One in 10 firms say the availability of management skills is a greater challenge than a year ago, suggesting that companies may struggle to recruit the right people to lead the recovery.

Improvement in most financial indicators
Companies reported an increase in turnover of 3.3 per cent in the past 12 months, and expect a rise of 4.6 per cent in the year ahead. Similarly profits grew by 2.5 per cent in the past 12 months and are expected to grow by 3.9 per cent in 2013. Although below the pre-crisis averages(of 6.5 per cent reported turnover growth and 5.3 per cent reported profit growth), expectations are more optimistic than they have been in recent quarters.

Positive confidence across all sectors and regions
Confidence is positive across all regions with the South East and Wales among the most optimistic. Businesses in all sectors also reported a positive trend with IT & Communications and Construction recording the highest Confidence Indexes.