Weekend round up: Is UK business in big trouble?

11th July 2011

The Telegraph reports that one-in-three finance directors believes the economy will fall back into recession; this was according to the survey of FTSE 100 and 250 companies by Deloitte.

A dive in confidence follows economists' expected downgrade of UK growth forecasts following poor figures on construction and manufacturing late last week.

Citigroup predicts that the the economy will have shrank by 0.2% in the second quarter while the National Institute has warned growth will be just 0.1%, following the previous six months of economic stagnation.

Angela Eagle, Labour's shadow chief secretary to the Treasury, was quoted saying: "After the zero growth we have seen over the last six months, we must hope that these forecasts prove to be wrong.

"We need to see growth of 0.8pc in the second quarter simply to get back on track to the Office for Budget Responsibility's latest three times downgraded forecast of 1.7pc growth this year."

The Guardian reports that prospects for Britain's economy are not helped by consumers spending cut backs.

It mentions a report from accountants BDO which showed that business confidence in the manufacturing sector has dropped to a two-year low.

So far the manufacturing sector has been a key driver of the economy, but in the past four months BDO's optimism index has tumbled by 26 points to 90.1.

Meanwhile the British Chambers of Commerce reported weak confidence levels in the second quarter.

Its chief economist, David Kern, told the Guardian: "British business supports the efforts to reduce the deficit. But businesses and consumers will have to cope with acute pressures in the short-term, and the economy is still very much at risk.

BDO also said rates should be kept on hold, as the Bank of England did following its latest monthly meeting last week. But the accountants also suggested the Bank should implement a further round of quantitative easing, and also called for reforms of the tax system.

A report in the Observer had yet more bad news, this time courtesy of a report from Ernst & Young.

It says retailers are feeling the pressure as consumers tighten their belts and that several high street chains could collapse if they were unable to afford enough stock for the key Christmas period on top of the next quarterly rental payments due in September.

A separate survey from research group Springboard shows a 2.2% year-on-year decline in the number of shoppers on the high street in June.

Diane Wehrle, at Springboard, said: "Regions such as the Midlands, the north and Wales felt the impact of a new wave of job losses and anticipated redundancies. Bombardier, which lost a crucial Thameslink contract, is set to lose 1,400 staff at its Derby plant, which has compounded already low consumer confidence and spending ability outside of the bubble of the south."

The next flashpoint for those awaiting more news of the UK economy will be this Wednesday, when unemployment figures are expected to show a 15,000 rise in the monthly claimant count, while on Tuesday monthly inflation figures will be published.

Ernst & Young research shows retailers have issued 26 profits warnings so far this year, more than the number issued over the whole of 2010.

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