Business confidence up

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Chartered Accountant Harris & Co reports that UK business confidence is up for the third consecutive quarter, although it lags behind global expectations, according to a study from ACCA.

The Global Economic Conditions Survey (GECS) of around 2,000 senior finance professionals, which is carried out by ACCA in partnership with the US-based Institute of Management Accountants (IMA), shows a marked improvement in global business confidence.

In Q1 2013 a quarter (24%) of respondents reported increased business confidence, a rise of 5% from late 2012. Those reporting a loss of confidence fell to 37%, down from 43% in the previous quarter.

The survey identified rising expectations of a global recovery, with 43% of respondents believing that the economy was improving or is about to do so, a 13% increase since the previous quarter.

Emmanouil Schizas, senior economic analyst at ACCA, cautioned:

‘"At the global level, the confidence gains recorded in Q1 2013 are much larger than would be expected given improved economic fundamentals and are likely to dissipate. In Europe, the fallout from the Cyprus bail-in will also likely result in a loss of confidence in Q2 – so while the Q1 results are promising, they are likely to be short-lived.’

In the UK, business confidence rose marginally, continuing the upward trend which began in the second half of 2012. Some 20% of UK respondents reported they were more confident about the prospects of their organisations, but 32% reported a loss of confidence in the first quarter of 2013.

UK respondents reported improvements in cashflow and new orders, although these at lower levels than in the early part of last year. However, UK business capacity, which includes capital spending and investment, has fallen significantly in the first quarter.

Schizas said:

‘The underlying reason for the UK’s loss of capacity may instead be that business opportunities dwindled in Q1, falling to levels comparable to a year ago. That said, the medium-term trend in business opportunities is flat, so capacity should stabilise.’

The survey found that within the UK, business confidence in Scotland was significantly stronger than in the rest of the country and has been on the rise since mid-2012.

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