Reading Time | < 1 min

Low business confidence points to a return to negative growth

Share this article

UK business confidence reached a 26 month low in August, according to the latest figures from the BDO Trends Report.

The figures suggest that the likelihood of a return to negative growth has increased, as short-run turnover expectations dropped to the lowest level since June 2009, below the level that indicates growth.

In addition, the Optimisim index, which predicts business confidence two quarters ahead, is hovering at the cusp of the positive v negative growth level, suggesting, at best, protracted, marginal growth will continue into early 2012.

Peter Hemington, Partner, BDO LLP, commented: “It’s worrying to see such a reliable growth indicator fall to a two-year low. Our predictions should serve as a wake-up call to policymakers that action must be taken to avoid economic contraction.

“Those asking for a rise in interest rates are doing so prematurely. What is needed and what we have long called for is a further round of quantitative easing, and it is heartening to see this stance becoming an increasingly credible position. The MPC must therefore give QE3 profound consideration if we are to arrest the forecasted economic slump.”