| | Confidence among British
businesses has reached
its highest level for
more than 18 months but
there is still an
autumnal chill in the
air as concerns about
falling sales weigh
heavily on boardroom
agendas, according to
KPMG’s latest quarterly
National Business
Confidence Survey.
The topline figures
show:
● More than half
(56%) of senior
executives questioned by
Opinion Leader Research
on behalf of KPMG claim
to have already seen
signs of recovery in the
UK economy, with 47%
seeing green shoots in
their own sectors.
● Almost a fifth
(19%) actively view
prospects for UK
business over the next
12 months as ‘good’ or
‘very good’ – compared
with fewer than one in
10 (9%) who felt such
optimism in the previous
quarter.
● Conversely, the
number of executives who
view prospects for the
economy as ‘bad’ or
‘very bad’ has more than
halved from 54% last
quarter to 24%.
Yet, despite the | |
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| | apparent increase in
optimism, there is still
a cold wind blowing
through the heart of
British businesses, with
21% expressing grave
concerns about a
continuing fall in
demand for their
products or services.
Indeed, falling sales is
now the most pressing
issue facing senior
executives, overtaking
credit and funding
issues as the biggest
business concern.
Malcolm Edge, head of
markets for KPMG in the
UK, commented: “While at
first glance these
statistics do look
encouraging, we must not
forget that opinion is
still heavily divided as
to whether or not the
economy is out of
intensive care. It’s
particularly interesting
that in spite of certain
economic indicators
pointing towards modest
growth in the third and
fourth quarters of this
year, the majority of
senior executives do not
expect the economy to
come out of recession
for at least another
seven to 12 months;
perhaps because there
is, as yet, no end in
sight to falling
consumer demand.”
He continued:
“However, for those | |
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| | majority of respondents
believe the recovery
will be long and slow,
whereby we bob along the
bottom of the cycle for
three to five years
before substantial
growth is seen again.”
Suggestions of a
‘double-dip’ recession
have been raised by a
number of economists who
predict both an end to
recent increases in
house prices, and more
pain to come in the
private sector when the
Government starts to
make its
much-anticipated cut in
public spending in 2010.
However, there could be
a further sting in the
tail as companies who
are eager to capitalise
on any early signs of
growth attempt to
scale-up too quickly.
Edge explained: “The
old adage that twice as
many companies fail on
their way out of
recession than do going
into it certainly rings
true. Over the last 12
months, companies have
worked tirelessly to get
to grips with their
working capital, with
many firms de-stocking
in response to declining
demand.
“However, the concern
is that when trade does
start to pick-up again, | |
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| | businesses will simply
not have the cash
available to finance any
new growth plans.
Although the majority of
banks are claiming to be
open for business, the
fact remains that at
present, lending will
only happen in specific
circumstances and under
very strict guidelines.
He concluded: “The
temptation to over-trade
or scale up too quickly
can be all-consuming
after a lengthy period
of inactivity, so there
is a certain irony in
the fact that this
desire to ‘get things
back to normal’ can
often be the straw that
breaks the camel’s back.
Companies therefore need
to resist the urge to go
in with all guns
blazing, and instead,
keep up all those good
habits that they have
relied upon to see them
through the downturn.
For instance, the use of
rigorous forecasting
will not only assist an
organisation in managing
its cash flow during the
final throes of the
downturn and demonstrate
good practice to
funders, but it will
also provide a sound
base on which to monitor
demands on working
capital.” | |
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| | firms who are concerned
about their sales
pipeline, there is
nevertheless a silver
lining to be found. The
continued weakness of
the pound against the
dollar and the euro
presents a massive
opportunity for British
firms to look beyond
these shores and tap
into overseas markets,
so it’s extremely
heartening to see that
expansion into new
markets was the most
commonly cited tactic to
address business
concerns. At heart,
British businesses are
an entrepreneurial
bunch, so taking
advantage of such
opportunities for growth
will be an important
catalyst in sustaining
confidence levels across
the economy as a whole.”
Edge said: “Looking
at the longer term
prognosis for the
economy, it is perhaps
surprising that only 21%
foresee a ‘double-dip
scenario’, where the
economy slips back into
recession after a brief
period of growth.
Rather, the vast | |
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