Business confidence reaches ‘new low’

19/05/08 15:51

Business confidence has declined steeply in the last quarter, but despite this there will be no recession, according to the Institute of Chartered Accountants in England and Wales (ICAEW).

The ICAEW’s Business Confidence Barometer (BCM) fell from -7.2 in the first quarter of 2008 to -19.7 in the most recent quarter. This is compared with +11.5 only a year ago.

The ICAEW said that lack of confidence has now spread to all sizes of businesses, across all industry sectors and all region of the UK. But it also said that a UK recession is “unlikely”, as a “low level of growth [is] still predicted.

Michael Izza, chief executive of the ICAEW urged businesses to better manage their cash-flow. “If there is a conflict between making profit and generating or saving cash, go for the cash alternative. Loss making businesses can survive, but businesses that run out of cash will not.”

Although all business sectors saw a fall in confidence, the property, finance and insurance sectors continue to feel under the most pressure. The property sector has seen confidence decline to the lowest level ever recorded for any sector in the BCM, plummeting to -47.0.

The findings showed that the economic downturn is now impacting on businesses of all sizes, yet Izza urged the finance sector to lend a hand to smaller companies in particular. “I would urge banks and government to ensure help is available to small and medium sized businesses during this downturn as they are the key drivers of the UK economy.”