Drain in confidence leaves many businesses in limbo

WEAKENING business confidence suggests that the UK economy could be on the brink of contracting, according to a survey published today.

The gloomy figures released by accountants and business advisers BDO will raise fears that the UK is heading for a triple-dip recession. The BDO Output and Optimism indices retreated from the 95.0 mark that indicates growth, according to the latest Business Trends report.

This is the seventh consecutive month where both indices have remained below 95.0, pointing to economic contraction ahead.

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Following a marginal improvement in the fourth quarter of 2012, the Output Index – which predicts short-run turnover expectations – decreased to 93.1 from a reading of 93.4 last month.

Ian Beaumont, partner and head of BDO in Yorkshire, said: “Our latest report indicates that many businesses are in a state of limbo, as ongoing volatility in the US and eurozone, coupled with sluggish GDP growth, is leaving them reluctant to hire and make plans for growth.

“Diversifying trade from the unstable eurozone is a must, and it is heartening to see businesses trading more with alternative regions; official figures released last week show that the eurozone now makes up only around 50 per cent of UK exports.

“The Government must implement measures to expedite growth for businesses, especially within the struggling manufacturing sector. To do this, we would like to see incentives which encourage manufacturing businesses to invest and make concrete growth plans.”

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Business activity strengthened in Yorkshire during December, according to another influential survey. At 52.5, up from 51.2 in November, the Lloyds TSB Yorkshire & Humber Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – signalled a second monthly increase in business activity.

The rate of growth was described as “modest and largely reflective of higher services output” as manufacturing production fell marginally. Firms generally attributed the overall expansion in activity to higher volumes of new orders and attempts to reduce backlogs of work.

Martyn Kendrick, area director for Lloyds TSB Commercial in Yorkshire & Humber, said today: “Although the rate of output growth increased in December, the modest rise was not enough to prevent a disappointing end to the year.”

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