Optimism among UK business leaders hits record high | Business
Optimism among business leaders is at a record high based on hopes that Britons will commence a multibillion-pound summer spending frenzy after being freed from lockdown.
On the day that non-essential shops and other businesses in England reopened for the first time since January, three separate studies suggest that the bounceback in the economy could be broader and faster than previously expected. Small, medium and larger FTSE companies all reported improved sentiment, with only exporters – affected by Brexit as well as coronavirus – suffering a downturn in fortunes.
Greater optimism has been spurred by expectations that consumers will unleash a spending spree in the summer. The study by the Centre for Economic and Business Research (CEBR) has predicted that savers will unlock more than a quarter of £192bn in lockdown rainy-day funds this year, adding £50bn to consumer spending. About £314m is expected to be spent in the newly reopened hospitality sector in this week alone, it said, while figures from the Post Office showed that Britons withdrew £590m in cash in March, the highest monthly figure since September.
Deloitte’s survey of bosses at some of the UK’s biggest public companies found that the potential spending boom was helping to fuel record levels of optimism among chief financial officers in charge of companies’ purse strings. Respondents said they now expected a “strong recovery in profits over the next 12 months, with profit expectations back to the previous high seen in mid-2014 at the top of the economic cycle”.
Forecasts for hiring and investment at the firms, which account for about 22% of the value of London-listed companies, are at their highest levels in nearly six years, it said. The accounting company BDO backed the assessment, saying its jobs market tracker had reached a three-month high.
Among smaller firms, the Federation of Small Businesses (FSB) said it had found the greatest level of optimism among its members since 2014.
Just over half (58%) of the 1,700 companies questioned expect their performance to improve this quarter, while 31% expect it to worsen. The FSB’s small business index has risen to +27.3 for the first quarter of 2021, a marked improvement on the -49.3 score at the end of last year.
Data published by NatWest showed that business activity rose in 11 of 12 UK regions over the last three months. Growth was led by the east of England, which reported a record high, ahead of the West Midlands, and Yorkshire & Humber. Northern Ireland was the only region to record a decline.
The surveys will be welcomed by Andy Haldane, the Bank of England’s chief economist, who surprised many in February when he claimed that the UK economy was like a “coiled spring” ready to explode if conditions were right.
Last week the FTSE 250 index climbed above its pre-pandemic level of 22,000. The FTSE 100 is still lagging behind its March 2020 high, though not by much.
Mike Cherry, chairman of the FSB, said: “It’s fantastic that our shops, hairdressers and gyms can get back to doing what they do best all over England from today, with some restrictions easing in other parts of the UK as well.
“The certainty provided by the government’s roadmap is filling many small business owners with renewed confidence. We live in hope that the virus stays in retreat so the remaining indicative dates for unlocking can be met, enabling our vital nighttime economies, offices and travel and tourism businesses to get back to it as well.”
A study last week for Scottish Friendly by CEBR suggested consumer spending would be the bedrock of any recovery. It estimated that households are sitting on an extra £192bn after a year of repeated lockdowns that limited their spending opportunities.
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Researchers interviewed 4,000 adults and found that nearly half had seen their cash savings increase.
Alongside those in Northern Ireland, the only other group of businessmen to report a drop in optimism was exporters. The British Chambers of Commerce said 40% of exporters reported a fall in sales in the first quarter of 2021, as Brexit-related paperwork and costs continue to depress trade.
Its survey of more than 2,900 UK exporters revealed that the percentage of firms reporting decreased export sales had increased to 41%, from 38% in the previous quarter.
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