Optimism about UK economy wide of the mark, warns IoD

2006

Business confidence in the UK is flat, despite a glut of research pointing to a pick-up in the economy, business leaders have warned.

The somewhat gloomy prognosis from the Institute of Directors comes on the back of a poll of 500 business leaders.

There had been no significant change in business optimism or performance over the past three months, it argued.

Across a range of indicators, including business optimism, performance, profitability, capacity utilisation and investment intentions, the message of the survey was that very little has changed recently, and certainly little to induce optimism.

Graeme Leach, IoD chief economist, said: "Thinking about UK growth prospects, there is nothing in our survey results to get excited about.

"The latest results suggest the GDP growth rates seen in the second half of 2005 are likely to persist into the first half of 2006.

"These figures are not a great start to the New Year but they are a reality check after the exuberance of the festive season. The good news in the survey is the absence of any build-up in price pressures," he added.

The balance of directors stating their company was performing well, versus those who felt it was performing badly, stood at 66 per cent in the latest survey, compared with 70 per cent previously.

The balance of those directors more versus less optimistic about their company's prospects, compared with three months ago, stood at 29 per cent, against 33 per cent previously.

The outlook for company profitability had edged up slightly. The balance of those directors expecting the trend in net profits to be up, versus those expecting it to be down, rose from 33 per cent to 36 per cent.

The balance of those directors reporting their company was/was not operating at full capacity stood at -16 per cent in the latest survey, compared with -14 per cent previously.

The investment intentions balance of those directors more versus less optimistic about their company's investment outlook, slipped from 12 per cent to 9 per cent in the latest survey, said the IoD.