Business Leaders Say Stop The Doom And Gloom On The Economy

Published on Tuesday, 21 February 2012 09:32
Posted by Scott Buckler

A new survey of 1,000 business leaders by the Institute of Directors (IoD) shows that companies are relatively confident despite the weak economic outlook

2012 UK Economic Outlook

 

  • Only 35 per cent of business leaders think there is a high or very high risk of a recession in 2012. But a further 53 per cent think there is a moderate risk of a recession. In addition, 11 per cent of directors think there is a low or very low risk of recession this year.
  • In sharp contrast to the recent deep recession, company directors are confident any future recession will be mild. 43 per cent think any recession will be short and mild and 33 per cent that it will be long and mild. 7 per cent think it will be short and deep and 10 per cent state it will be long and deep.
  • Despite the weak UK macroeconomic outlook, companies appear to be relatively optimistic about their own prospects, with 50 per cent expecting higher or much higher revenues in 2012 than in 2011. This compares with 27 per cent expecting lower or much lower revenues.
  • Profit expectations are also positive. 40 per cent of companies expect profits will increase in 2012, compared with 32 per cent who expect they will decrease.
  • However, despite relatively optimistic revenue and profit expectations companies appear to be very cautious about increasing business investment and employment.
  • 27 per cent of companies think business investment will be higher this year but this is exceeded by the 29 per cent who think it will be lower.
  • 27 per cent of companies think employment will be higher this year but this only just exceeds the 25 per cent who think it will be lower.
  • The key source of economic concern in 2012 is not difficult to find. 1 in 2 directors think there is a high or very high risk of a euro break-up this year. 12 per cent think there is a very high risk, 38 per cent a high risk, 34 per cent a moderate risk, 13 per cent a low risk and 2 per cent a very low risk of a break-up.

Commenting on the results, Graeme Leach, Chief Economist at the IoD said:

“Despite all the doom and gloom in the media only 1 in 3 directors think there is a high or very high risk of a recession in 2012. The key group to watch is the ‘swing vote’, the 1 in 2 directors who think there is a moderate risk of a recession. Whether this group becomes more pessimistic or optimistic may well be the difference between recession and recovery in 2012.”

He added:

“The resounding message from the survey is the critical role of confidence at this stage in the economic cycle. If the euro-crisis stabilises, confidence could return relatively quickly and companies could dust down business investment and recruitment plans put on hold last year. Alternatively, if the euro-crisis gets worse, confidence is highly unlikely to return this year.”

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