News

August 26, 2011

Businesses losing confidence in economic recovery

Businesses are less confident about the economic outlook than they were at the start of the summer, research from accountancy firm BDO has found.

BDO’s Business Optimism index fell to 95.1 in July from 95.6 in June, the lowest level since last December – largely due to a fragile manufacturing sector. The report indicated that most firms did not expect to see any growth for the rest of the year.

BDO partner Peter Hemington said the UK’s economic recovery was continuing to falter. “The rapid decline of the manufacturing sector – championed as the key to a rebalancing of the UK economy – is alarming,” he said. “And the services sector is showing little sign of picking up the slack.”

Prospects for the job market also remained bleak, the report highlighted, with high unemployment and weak salary growth contributing to uncertainty.

The Federation of Small Businesses (FSB) said the findings reflected recruitment worries among small firms. “Many small businesses are being forced to reduce the size of their workforce because of falling revenues and the pressure to cut operating costs,” said an FSB spokesman.

FSB chairman John Walker added that for many small firms, revenue growth and expectation of higher turnover has dropped again.

“We are still seeing more small firms expecting to reduce their workforce than increase it,” he said. “More needs to be done, such as cutting VAT to 5 per cent, to encourage businesses to take on staff and grow their business.”

While operating a recruitment freeze could put pressure on teams, business owners need to maximise staff efficiency by planning ahead effectively, according to HR and employment law consultant Tara Daynes.

“Carry out a skills audit to see what expertise you already have in the business and identify what your commercial goals are,” she said. “Investing in formal training, training people on the job and looking at rising stars in the business can all be cost-effective ways to boost current performance without recruiting new team members.”

• Confidence up, but gap between small and large firms growing