Confidence on the up

The recent plunge back into recession has done little to dent confidence among UK companies, two new reports suggest.

The UK Business Confidence Monitor from chartered accountants ICAEW and consultants Grant Thornton said that they saw increased confidence among UK employers.

The BCM confidence index is 12, up from -9.3 in the last quarter and the highest level since the second quarter of 2011. The rise suggests economic growth of 0.6% in the second quarter, the organisations said.

Grant Thornton’s chief executive Scott Barnes said:"Turnover and profits are all increasing but nowhere near the rate seen pre-recession and businesses are beginning to realise that this environment may be the norm for some time."

At the same time, the CBI has released a similar report charting an increase in optimism by smaller manufacturers rose for the first time since the mid-2011.

According to the business organisation, a net 22% of small and medium-sized enterprises (SMEs) who are manufacturers said they were more optimistic in the three months to April.

"Firms expect orders and output to rise strongly in the coming quarter and plan to invest more in the year ahead, pointing to growing momentum in manufacturing activity," said Lucy Armstrong, chair of the CBI's SME council.

The majority of respondents saw a slight rise in total new orders and expect to see faster growth over the next three months, the survey added.

Last week the CBI said it expected GDP growth in 2012 to be 0.6%, slightly down from its forecast in February of 0.9%. This, it said, was a direct consequence of the preliminary ONS figure for quarter one. Despite this, growth prospects remain broadly unchanged for the latter half of the year and, in 2013, the CBI forecasts GDP growth to be 2.0%.

Quarter-on-quarter growth is expected to be flat in the second quarter of 2012 (0%), affected by the impact of the additional bank holiday for the Diamond Jubilee.

However, there will be an improvement in the second half of the year (0.7%, 0.5%), reflecting an improving global economy and an expected easing in inflationary pressures, plus a slight boost from the Olympics and a bounce back from the second quarter.

While inflation is expected to be somewhat higher than previously thought throughout 2012, in part due to recent oil price rises, it should continue on a downward trend and come close to hitting the Bank of England’s target in the spring of 2013.