Economic uplift a ‘false dawn’

The final quarter of 2009 will see increasing business failures, and trading conditions are likely to worsen again in quarter one of 2010 for the volatile construction sector, according to predictions released in a new business index.
 
The Business Factors Index has been compiled by leading independent invoice financier Bibby Financial Services. This is the first in a series of quarterly reports which aim to reveal key findings about the UK economy and, in particular, the construction, manufacturing, wholesale, transport and business service sectors. On this occasion the data highlights that a V-shaped recovery is unlikely but trading conditions should ultimately improve over the coming year.
 
The Bibby Business Factors Index tracks small business turnover over the past two years and the trends derived from this data have been collated with the results of a series of interviews conducted with more than 300 business owners across all sectors. It revealed:

More than half (51%) say activity has waned in the past six months
More than two thirds (68%) state that business is worse than a year ago
A third (34%) describe trading conditions as ‘tough’ and are barely surviving
Nearly one in seven (15%) have had to cut back operations in some way
Nearly a quarter (23%) predict conditions will worsen during the remainder of the year
12% are concerned that the recovery of the construction industry will lag behind other sectors but 14% expect the recovery to come sooner for them than other industries
 
More encouragingly, despite being one of the worse hit by the current recession, the industry is showing glimmers of hope:

Just over a third (36%) remain positive for the future
One in five feel conditions will improve before the year is out and 2% think recovery will be dramatic
 
The Index also looked at confidence across other business sectors and showed:

The wholesale sector has been one of the top performers over the past two years but now appears more cautious than other industries
Despite faring consistently throughout the recession, the mood now among SMEs in the transport and storage sector remains gloomy due to problems with legislation and increasing costs  
Recovery of the business services sector is lagging behind other industries, indicating the delayed impact of the recession on budgets moving into the new financial year
 
Findings from the index are supported the CBI’s latest economic forecast showing that, although the economy is expected to show signs of recovery in the second half of this year, with GDP expected to grow by 0.3% in Q3 and 0.4% in Q4, the pace of recovery will remain constrained by a lack of consumer spending and a decline in government expenditure having a knock-on effect on housing and commercial work available which was also the case in Q1 2009.
 
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