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Optimism Declining in January 2013

According to research by the business advisers BDO, business confidence in the UK is declining, despite some improvements over the course of 2012. While the mechanisms used to gauge such things can be complicated, it is clear from the report that the indices indicating both output and optimism have decreased below the crucial 95.0 mark which indicates growth.

This makes January 2013 the seventh consecutive month where both the output and  optimism indices have remained below this crucial watermark. While the output index showed a minor improvement in Q4 last year, it has now decreased well below the 95.0 mark.

Put together, this all suggests that the UK will experience further contraction in the first quarter of this year. There have been murmurings of a triple dip recession for the UK, following on the heels of the double dip of last year – this could have serious ramifications for confidence if we were to slip back into recession, no matter how marginal. Indeed, given there has been anticipated negative growth in Q4 of 2012, there is a real danger.

The picture for the next two quarters is equally bleak, with the optimism index declining further in December’s report. This is partly to do with UK businesses’ nervousness regarding the UK economy, where there has not been a final agreement on spending reductions associated with the fiscal cliff. This is creating huge uncertainty in not only the UK but the rest of the world as well, and this will test UK business confidence throughout this quarter. It’s not just the Eurozone that UK businesses are worrying about.

While there are many fingers crossed that 2013 will see some sort of recovery for the UK’s small businesses, there needs to be some sort of improvement within the UK lending environment in order to bolster some sort of optimism. Without funds to invest in their businesses and with worldwide economic strife continuing, it’s looking to be a hard year for the UK’s small business owners.

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