Confidence returns but full-steam recovery not expected until next year

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Business confidence returned to growth over the past six months, a survey reveals, but two-thirds of firms warned that the recovery will not properly gain momentum until next year.

The Regus Business Confidence Index, which surveyed more than 2,500 UK companies, found that optimism levels increased by four points to 91 this month, helping reverse the sharp falls seen when the survey was last carried out in October.

Small companies led the way, with a six-point rise to 88, driven by encouraging growth in revenues and profits, although their levels of confidence still lag behind larger companies.

But while confidence has recovered some of the 21-point fall it suffered in October, companies of all sizes warned that 2012 will remain challenging, with two-thirds predicting that the recovery will not get into full swing until 2013.

Celia Donne, regional director 1

“It is clear from our research that the business performance and confidence of small firms has particularly improved over the last period.”

The upbeat survey is the latest of a series of economic indicators that suggest the economy is gathering pace after a 0.3 per cent contraction in the final quarter of 2011 and may have avoided a return to recession.

Global workplace provider Regus said companies planned to continue making cost savings in coming months, including making efficiencies in their supply chain, using more flexible work space and greater use of pay-as-you-go services.

Large firms said making too many permanent staff redundant was the main reason companies struggled in the downturn, while small firms highlighted difficulties in getting affordable capital.

However, Regus also found that business confidence in the Middle East had slipped back nine index points to 125 since September. Companies reporting revenue growth fell to 49 per cent compared to 55 per cent six months ago. The percentage reporting profit growth was stable at 45 per cent. Sixty-three per cent of companies in the Middle Eastern firms said paying for unnecessary office space was the main reason for hard times during the downturn.