Business surveys paint brighter picture for year ahead as confidence returns

A RAFT of business surveys published today suggests that confidence levels are building with the threat of a “triple-dip” recession receding as the new year unfolds.

A poll of more than 1,300 business leaders by the Institute of Directors (IoD) reveals a growing sense of optimism about the year ahead. It also indicates that support for the coalition government’s sweeping public cuts programme remains strong.

The IoD survey, which was conducted last month, comes as twin reports from banking giant Lloyds show business confidence improving on both sides of the Border.

While the latest business monitor from Lloyds TSB Scotland highlights pressure on company finances in the three months to the end of November, the outlook among Scots firms for 2013 is considerably brighter.

According to the bank, expectations for turnover in the next six months showed a net balance of -5 per cent, up from -14 per cent a year earlier.

Around half of companies expect sales to be static, 23 per cent believe they will increase and 28 per cent predict a decrease.

Meanwhile, Lloyds TSB Commercial’s “Business in Britain” study – also out today – reveals a jump in confidence levels as concerns over the eurozone area subside. The report, which is produced twice yearly, and is now in its 21st year, canvasses the views of 1,800 businesses across the UK.

Trevor Williams, chief economist at the group’s commercial banking arm, said: “Policy measures undertaken by the European Central Bank and European Union officials are beginning to filter through and businesses show greater optimism about their trading activity over the next six months.

“These glimmers of hope should lead to a gradual increase in the underlying pace of economic expansion over the forthcoming year.”

However, Williams noted that domestic demand continued to be weak and appealed to businesses to step up investment – a request that may raise eyebrows given the criticism of banks’ failure to lend.

He said: “A lot of UK companies are sitting on cash rather than investing, but for the economic recovery to become enduring, that money will have to start being spent.”

Among the IoD survey’s findings, the proportion of directors who expect 2013 to be better than 2012 exceeds those with a pessimistic outlook by a margin of +31 per cent. This is a direct reversal from the start of 2012, when the balance of opinion on the new year was -31 per cent.

The panel’s view of the probability of a return to recession has also fallen, with just 16 per cent saying the risk was high compared with 35 per cent at the start of last year.

IoD chief economist Graeme Leach said: “2012 was a tough year, but business leaders expect 2013 to be much better. The risk of a return to recession and a triple dip has not gone away, but it is receding fast, and expectations of growth are rising.

“George Osborne’s approval ratings have suffered, but he retains business support overall. The deficit reduction programme in particular has overwhelming backing from UK directors – the government absolutely must not waver from the course.”

Donald McRae, chief economist at Lloyds TSB Scotland, added: “Business expectations for 2013 have improved from a low position.”