The latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) has shown the welcome news that business confidence looks set to improve in the second quarter of 2013, with the latest figure currently standing at +16.7. The increase follows on from the the previous figure of +12.8, which was reported back in Q1 2013.
The Confidence Index is a leading indicator for growth, where last quarter, the Index predicted that the UK economy would grow in Q1 2013 to avoid a triple-dip recession. The first estimate from Office for National Statistics (ONS) suggested that the economy would expand quarter on quarter by 0.3%. This quarter’s BCM suggests that the economy will grow by 0.6% in Q2 2013, indicating that the UK economic recovery may be gaining a stronger foothold and improving quarter after quarter.
The main Key Points emerging from this Quarter are as follows:
- A continued increase in confidence suggesting that economic growth will rise in Q2 2013.
- Companies’ expectations for profit growth increased further though remain below typical pre financial crisis levels.
- Business investment intentions remain weak and are broadly in line with the latest Office for Budget Responsibility (OBR) forecast for 2013.
- The expected headcount growth remains modest and employee salary increases are extremely weak.
Initial ONS estimates for Q1 2013 show that the economy is expanding again, driven almost entirely by the services sector which grew at a quarter-on-quarter rate of 0.6%. The construction sector once again continued to constrain growth, seeing a contraction of 2.5% over the same time period. However, this quarter’s BCM shows a sharp improvement in construction business confidence, suggesting that the worst may be over for the sector, in which businesses up and down the UK will be breathing a huge sigh of relief.
Downside risks to the UK economy still remain however, in particular from the ongoing economic crisis in the eurozone. Gloomy news continues to emerge from the region and a further output contraction is likely and predicted in 2013. This will pose a significant challenge to UK exporters, threatening a potential trade-led recovery.
However, in conclusion, the latest economic statistics and BCM data suggest that the UK economy has not only beaten off concerns about a triple-dip recession, but economic recovery is starting to stand on more solid ground, and this can only be viewed as a positive for the UK economy as a whole.
The full ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) Report can be viewed here.