Small firms still feel the austerity squeeze

A survey published by GfK NOP suggests that Britons have become less gloomy as they prepare for the Jubilee and the Olympics.

The survey’s headline index rose to -29 in May, a level last reached in February, from -31 in April.

The reading contrasted with economists’ forecast for a dip to -32, although the index was still weaker than a year ago and far below its long-term average of -9.

“After the revised (official GDP) figures showed the economy is deeper in recession than previously thought, the Government will view these figures as good news,” said Nick Moon, managing director of Social Research at GfK.

“However, while this rise is indeed positive, consumer confidence remains mired in the very negative position it has been in for almost 18 months.”

A slump in construction output plunged Britain into recession in the first quarter of this year.

Consumer spending – which drives about 60 per cent of Britain’s gross domestic product – added 0.1 percentage points to quarter-on-quarter GDP growth between January and March, when consumer morale hovered around -30 on the GfK measure.

A breakdown of the GfK poll showed that consumers were more positive about their financial prospects over the next year. However, consumers felt that the climate for major purchases worsened slightly in May.

GfK interviewed almost 2,000 people on behalf of the European Commission between May 4 and May 13.

Andrew Burrell, the Leeds-based head of forecasting at property services firm Jones Lang LaSalle, said yesterday: “The NOP figures are only for May, and this survey is still well below its historic average.

“The improved weather in the UK and the bank holidays possibly explains some of the uplift in consumer confidence and it remains to be seen if it will be sustained over the coming months.

“While it is good news of sorts, the underlying picture for the high street across the UK continues to be weak as consumers continue to face the strong headwinds created by the 2008 financial crisis.”

Jonathan Davis, of Harrogate accountants and private client tax specialists, Saffery Champness, welcomed signs of an improvement in consumer confidence.

But he added: “There is still a long way to go before we get back to a position of real confidence.

“While the small rise shows that people may be becoming more comfortable with the current economic situation, the austerity measures and negative publicity throughout the UK and Europe means smaller businesses continue to feel the pressure of the uncertain environment.

“The contraction in GDP in Q1 2012 is evidence that times continue to be tough.”

Yorkshire’s high streets would hopefully benefit from the upturn in consumer confidence, Mr Davis said, although small local businesses will continue to need support to ensure recovery and growth is achieved.

He added: “Stimulation from the Government remains essential, whether through ‘plan B’ action – revisiting fiscal and tax policy – or otherwise, to ensure consumer confidence continues to increase and the benefit is felt by local, smaller businesses in the region and the rest of the UK.”

Tim Cross, the partner and head of commercial property, at York-based Langleys Solicitors, said the Gfk index showed a small increase from a low base, which suggested the growth in consumer confidence was quite fragile.

He added: “People are not quite ready to spend their way out of recession just yet, but this is a move in the right direction.”

The Federation of Small Businesses (FSB) said the figures reflected the findings of its own survey, which showed that small business confidence had improved despite rising overheads and problems accessing finance.

Gordon Millward, the regional Chairman of the Federation of Small Businesses, said: “It is a testament to the hard work and determination of the UK’s small businesses that, in the face of rising costs and falling demand, they are still more confident about the year ahead and are looking to expand. The Government must bolster this confidence by doing everything in its power to remove the barriers to growth which our members have highlighted.

“That means taking action against rising energy and regulatory costs. It means putting small business concerns at the heart of key Government decisions.”

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