Confidence high as UK predicted to exit recession

OFFICIAL figures due this morning are set to confirm that the economy came out of recession in the last quarter of 2009.

The economy has contracted for a record six consecutive quarters – making this downturn the longest and deepest since record began – but the signs of green shoots of recovery have been seem of late.

Last week it was revealed that unemployment in the UK fell for the first time in 18 months. The majority of retailers also fared well over the Christmas trading period.

The UK is one of the last major economies still in recession. Europe’s two biggest economies – Germany and France – came out of it last summer.

The UK recession began in the April-June quarter of 2008. Since then the economy has shrunk by 6%. More than 800,000 jobs have been lost.

The Office for National Statistics (ONS) will release the latest GDP figures – for the final three months of 2009 at 9.30am.

Although the end of the recession is an important milestone, funding for businesses is still challenging.

Meanwhile, a survey conducted by business advisors KPMG shows that UK companies are the most bullish in Europe about their prospects for growth.

More than 80% of chief executives claimed that the outlook for their business in 2010 was either good or very good.

The majority (46%) of mid-market businesses in the UK think that economic recovery will take place by the end of 2010 while a further 39% believe the upturn will come in 2011.

Just under two thirds (65%) expect to maintain workforce levels during 2010, with a further 22% planning to recruit new members of staff.

Only 13% intend to actively reduce their headcount.

The survey among 3,200 mid-market businesses in eight countries found that approximately three quarters (74%) of European businesses believe their prospects for 2010 to be positive.

UK firms were overwhelmingly the most optimistic while German (65%) and Danish firms (66%) were the most measured in their assessment of the outlook for the next 12 months.

The research also indicates that the majority of UK firms appear to have weathered the economic crisis well with three quarters saying that their company was as strong at the end of 2009 as it was at the end of 2008.

Only 25% indicated that their business was weaker as a result of the recession.

This compares to a European average of 69% who felt their company has survived the recession intact.

Iain Moffatt, senior partner at KPMG in Leeds, said: “At first sight, the fact that almost three quarters of respondents to our survey in the UK say that business over the last 12 months has been either good or very good is staggering given the economic circumstances.

“I’m inclined to think that it’s a reflection of the sheer relief felt by management teams who have successfully navigated their way through the downturn.”

He continued: “In times such as these, survival equals success, so it’s small wonder that so many feel at the start of 2010 that they have reason to be cheerful.

“This is reflected in their cautiously optimistic outlook for the coming twelve months – many are now making growth plans, with more than half planning to develop new products and services, and over a third looking to tap into foreign markets.”

However, financial risk continues to be cited as the greatest threat to UK business in 2010 with access to capital and currency risks featuring high on the list of challenges.

Pressure on company pension schemes is another significant issue – something which appears to be further down the list of priorities elsewhere in Europe.