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Businesses pessimistic on economy

23/05/2008

Businesses are pessimistic about the economy but confident they can see out the credit crunch, a survey has found.

The Chartered Institute of Management Accountants (CIMA) has released figures from its quarterly economic survey showing 62 per cent of firms are forecasting sales growth for their business in the next four months – but 48 per cent believed a recession is likely, while another 37 per cent said it is a possibility.

The survey of 200 finance directors found only 15 per cent believed a recession as a result of the credit crunch to be unlikely, despite half the companies reporting sales have grown in the last quarter.

Confidence in the job market is also mixed - four in five businesses say they do not anticipate any job losses this year.

However, those 20 per cent of firms that did expect cost cutting measures forecast that temporary and agency staff would be the first to go and less money spent on outsourcing services.

Over half of companies said they will not be looking to take on any graduates over the next year.

Of the companies surveyed, 35 per cent said they were anticipating budget cuts may be needed, with 75 per cent targeting temporary staff as an area for making savings.

Ray Perry, director of brand for CIMA, said: "It's interesting that the survey does pick up on certain contradictions at first glance. Some companies expect their sales to grow and become more profitable, but looking at the overall economy expect a downturn – so how can those two things reconcile?

"And what came out in discussion was that sensible companies would look at their costs and make sensible cuts and adjust what they are doing to the climate as a whole."

The survey backs up figures from the government released yesterday that show less business investment made across the country over the last quarter.

The Office for National Statistics (ONS) shows business investment in the first three months of 2008 was 1.4 per cent below the previous quarter, standing at £36.22 billion.

And the Bank of England's May report shows investment intentions "fell sharply further" in the services sector, having fallen in the last six months.