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Positive growth forecast for mid-2012, says BDO
A leap in businesses’ output expectations signals a significant move towards economic growth, according to the latest Business Trends report by accountants and business advisers BDO.
BDO’s Output Index, which points to business conditions one quarter ahead, has risen above the crucial 95.0 mark which indicates growth for the first time since last summer, indicating positive economic growth for mid-2012. The increase from 93.5 in February to 95.7 in March puts the Output Index at its highest level for nine months, suggesting that short-term economic prospects for the UK will continue to strengthen.
Looking further ahead, business confidence for the second half of the year is more muted. BDO’s Optimism Index – which predicts business performance two quarters ahead – fell from 98.0 in February to 96.7 in March. It remains above the important 95 level, but lingers below the robust 100.0 mark that equates to average UK trend growth. This suggests the recovery is headed in the right direction, but moving slowly.
Similarly, a knock to the Manufacturing Optimism Index indicates poorer prospects for the back end of 2012. Confidence has fallen below 95,
from 96.9 in February to 94.6 in March, signifying businesses expect manufacturing growth to slow later in the year. This can be attributed to high crude oil prices and sluggish growth in the eurozone area, a key export market for UK goods, heightened by Spanish debt concerns.
Malcolm Thixton, lead partner at BDO based at Ocean Village in Southampton, said: “It’s encouraging to see positive signs for UK growth in the short term, but its two steps forward followed by one step back at the moment, as the overall recovery is likely to be a slow one. Businesses face low demand from Europe and China and high commodity prices globally, meaning tough trading conditions for UK exporters.
“It’s vital that the Government takes steps to ensure the economic recovery is broad-based – long-term economic success hinges on a stable and confident manufacturing sector. If British firms are to meet the chancellor’s recent challenge to double exports to £1 trillion by 2020, then they’ll need a clearer and more explicit framework and strategy to relieve pressure on manufacturers and encourage investment in infrastructure and innovation.“
One answer lies in innovative finance
Responding to the Bank of England’s latest Trends in Lending figures, James Meekings, co-founder of Funding Circle, the online marketplace where people directly lend to small businesses in the UK, said: “Today’s lending stats are yet another demonstration that banks alone cannot solve this impasse. The Government recognised the impact alternative funding sources could have in this year’s Budget and now is the time for these options to be fully employed.
“New and innovative forms of finance, such as peer-to-peer lending, will improve the supply of finance directly to small businesses and start delivering real growth for our economy.
“There are thousands of businesses looking for funding to facilitate growth, however what we hear from good businesses is that the process of gaining bank finance is simply too prohibitive. In an environment where businesses need to be agile, applying for a bank loan is a lengthy and cumbersome process that can take months.
“Since Funding Circle launched, we have helped lend more than £30 million to small businesses, with owners receiving their money in approximately two weeks.“
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THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MAY 2012
www.businessmag.co.uk
www.port.ac.uk/pbs
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