Government public spending cuts and the prospect of a renewed global economic slowdown are increasing fears among British company bosses of a double dip recession. A quarterly survey of finance directors by accountancy firm Deloitte found confidence in the economy at a 12-month low.
The survey of finance directors from 32 FTSE 100 companies and 93 British firms showed the proportion of “optimistic” finance directors dropped from 40 per cent to 24 per cent, the second consecutive quarterly decline. Finance directors in a “sentiment weighted survey” said they believe there is a 38 per cent chance of the country falling back into recession, compared to 33 per cent three months ago.
The gloomy outlook comes as the markets brace themselves for the European Central Bank’s stress tests of eurozone banks later this month and ever present concerns about market assaults on sovereign debt.
Traders and analysts are waiting to see if countries such as Ireland, Portugal or Spain avail themselves of the €750 billion emergency loan facility from the European Union and the International Monetary Fund.
The Deloitte survey found finance directors believe cutting costs – and, by extension, jobs – is still paramount.
Everywhere pessimism persists despite statistics that back up claims of modest signs of recovery, City economists have been toying with the acronym GRIM – “growth really is mediocre” – to supplant the NICE years (“non-inflationary consistent expansion”) – propounded by Bank of England governor Mervyn King.
The British Chambers of Commerce’s own economic survey of more than 5,600 businesses throughout the country found that despite improvements in employment and investment and increases in export orders and domestic sales it still regards the threat of a relapse into recession as “serious”.
Ireland, the first eurozone country to slide into recession in 2008, “officially” came out of recession during the first quarter of this year but joblessness continues to rise, with nearly 445,000 people signing on – more than doubling in two years.
According to InsolvencyJournal.ie, almost 800 companies in Ireland – a third of them in construction – went out of business in the first six months of 2010, up 27 per cent on the same period a year ago.
