U.K. Business Confidence at 2-Year High
Finance directors at Britain's largest businesses are feeling more confident about the prospects for their companies than at any time in the past two years, research published yesterday reveals.
The survey, from the accountancy firm Deloitte, will reinforce the generally more upbeat mood among many economists and business leaders as the UK awaits Friday's GDP figures from the Office of National Statistics, which could signal a formal end to the recession in this country.
Deloitte said the financial directors of leading companies, whom it surveys every three months, had become markedly more optimistic about their businesses' prospects in recent weeks, though very few expect the UK to return to strong economic growth in the near future.
The survey reflects continuing easing in the credit markets, with many companies now reporting that modest borrowing is finally become more widely available. However, it is also clear from the survey that finance directors remain cautious about the short-term outlook, with many warning that the climate in which their companies trade has changed for the foreseeable future.
Margaret Ewing, Deloitte partner and vice-chairman, said: "While the economic outlook has improved, people remain cautious – 79 per cent think now is not a good time to take risk on to their balance sheet and debt remains out of favour; many more CFOs plan to reduce debt over the next year than raise it."
Ms Ewing said that many companies were anxious not to repeat the mistakes of the past.
"In future, companies are likely to be more financially conservative, running lower levels of corporate gearing and higher levels of liquid reserves," she said. "These changes are already making themselves felt, with bank borrowing going from being the most attractive to least attractive form of finance in the space of just two years."
Ian Stewart, Deloitte's chief economist, added: "The caution about the outlook is captured in directors' plans for their own companies for the rest of this year – few companies are expanding or likely to increase hiring before the end of the year."
Nevertheless, many companies are now thinking about expansion, or at least assuming that others have moved into that mindset. Some 92 per cent of finance directors expect a rise in mergers and acquisitions activity over the next 12 months, while 39 per cent say they are contemplating making corporate acquisitions this year.
Deloitte's findings reflect other similar surveys conducted in recent weeks, with a string of business leaders also speculating that the worst of the recession may be over, even if the UK is not set for a strong upswing.