Confidence is starting to return

Jun 22 2009 by Karen McLauchlan, Evening Gazette

BUSINESS confidence has nearly doubled during the past quarter but only half of companies think the UK has now reached the bottom of the downturn, research showed today.

Around 42% of senior executives think their business prospects are now good, up from just 22% during the first quarter of the year, according to KPMG. At the same time, only one in four executives think their prospects are still poor, compared with 37% in the spring.

But despite their optimism about their own prospects, business leaders are far gloomier about the wider economy, with 54% considering the UK economic outlook to be bad, although this is an improvement on the 81% who felt this way last time the research was carried out.

Around 55% of executives now think the economy has reached the bottom of the cycle, with 49% expecting the recession to last for less than a year, but 42% think the economy is still on a downward curve.

One in three executives also admitted their company is experiencing financial difficulties, with 51% facing higher financing costs and 53% experiencing tighter borrowing conditions.

Overall 41% of companies said their banking relationship had worsened during the quarter.

Malcolm Edge, head of markets for KPMG in the UK, said: “While it’s encouraging that there has been an increase in confidence, this is only an improvement compared to the spring which revealed the lowest levels of optimism since our survey began in 2004.”