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Upturn in business confidence heralds ‘end’ of recession

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A surge in confidence among business professionals could suggest that UK is about to emerge from the recession.

The latest findings of the UK Business Confidence Monitor (BCM), carried out by the Institute of Chartered Accountants in England and Wales (ICAEW), revealed that, in the third quarter of the year, optimism among professionals reached its highest level since the economic crisis began.

Confidence rose from -28.2 to 4.8, taking the monitor into positive territory for the first time since the third quarter of 2007 and recording the biggest single improvement in the BCM’s six-year history.

Based on its findings, the ICAEW is forecasting growth of 0.5 per cent for this quarter, at last breaking the shackles of five consecutive quarters of decline.

The survey found that businesses are anticipating a rise in all except one of the 14 financial performance indicators included in the BCM.

Some 41 per cent of senior business professionals were more confident about the economic prospects facing their business in the next year, although only 6 per cent were much more confident, highlighting the prevailing sense of caution that still surrounds the strength and timing of the recovery.

According to the survey, IT is the most optimistic sector, followed by banking and insurance.

Michael Izza, chief executive of the ICAEW, said: “This quarter’s BCM suggests that the UK recession is at an end. While there is no doubt that the UK economy is on its way to recovery, we shouldn’t underestimate the challenges ahead for businesses.

“Businesses have taken the right actions to mitigate the impact of the downturn and are playing their part in an improving economy. Policies such as quantitative easing, the fall in interest rates and the VAT reduction have all helped improve business confidence. However, the recovery is very fragile, and I would urge policy makers not to take any actions that could derail it.”

Mr Izza added that, although positive growth in the autumn seems more likely, concerns about the strength of the recovery persist.

He concluded: “Confidence is up, but those in manufacturing and engineering, as well as large businesses, remain cynical about their prospects for the future. Both are crucial to the UK economy, and the signs are that the next twelve months are very much about building for the recovery.”