The major UK accountancy bodies the ICAEW, and the ACCA, are in complete agreement that the United Kingdom is set to grow faster than any other Western economy and their national monitor of business confidence, the BCM Confidence Index, predicts economic growth of 1.3% in the fourth quarter of 2013.
The BCM Index stands at +31.7, up from +24.0 in the third quarter of this year, its highest level in the 10 years that the BCM has been running and its latest report identified clear signs of rising business confidence across all sectors. The report also shows that the current upbeat mood has also been the longest sustained period of rising optimism registered.
This view of the economy, mirrors that of the Confederation of British Industry (CBI), whose recent assessment also suggest a strong pick-up in growth. At the CBI’s recent annual conference, speaker after speaker endorsed the view of the chairman who said the UK economy was recovering at a “slow and steadily upward” pace.
The BCM report says the recovery is happening among both business and consumer sectors and those companies are expecting accelerating growth in exports and business investment next year.
Michael Izza, CEO of the ICAEW, said: “This quarter’s report shows that the UK economic recovery is well under way.
The shape of the recovery is changing as businesses respond to rising confidence by looking to new markets and increasing their investment plans.”
The ICAEW uses forecasts from the Centre for Economics and Business Research to compare the outlook for UK growth to other western nations, which shows that the UK is likely to be leading those countries by the end of next year.
Director-general of the CBI, John Cridland has confirmed that the CBI predicts growth this year of 1.4%, up from the 1.2% forecast in August, following a strong third-quarter performance and that It then expects a growth rate of a minimum of 2.4% in 2014.
A separate survey by the Federation of Small Businesses found confidence levels among owners and managers of smaller businesses (SME’s) had doubled to a record high in response to the improved economic climate.
Even the Office for National Statistics (ONS) are getting in on the act and have confirmed that the latest official figures showed that the UK’s economy grew by 0.8% between July and September. They also commented that there had been a “fairly strong” performance across all sectors.
Will it last?
The first two quarters of 2014, showed that the recovery this year was largely based on higher consumer spending, largely driven by the resurgence in the housing market with prices rising nationally and not just in London. Until recently, there was reluctance among business leaders to match this increase in confidence among consumers with higher business investment; however this changed significantly in the third quarter and looks likely to continue at an increasing pace.
Michael Izza has said, that the immediate outlook is rosy and: “If it continues at this rate, the UK economy will be one of the fastest-growing economies in the western world going into 2014. Just as significantly, the shape of the recovery is changing as businesses respond to rising confidence by looking to new markets and increasing their investment plans. However we cannot be complacent and all of us need to work hard to maintain the momentum built up this year while remaining alive to the threats to our recovery, especially those outside the UK”.
How will it affect the man in the street?
While the economic recovery beds in, there are some concerns that the benefits have not yet trickled down to cash strapped families. The ONS figures reveal that real household disposable income has changed little since the second quarter of 2009, despite cumulative real GDP growth of 4.2% in the same period.
Until now, without businesses investment, productivity was not really improving, thus reducing firms’ ability to offer higher wages. However, the recent signs are that businesses are now committing to major long-term investment, which should mean that wages will begin to rise again in 2014.
The second factor now coming into play is that most businesses expect the strongest growth in employment since the financial crisis with an expected increase of 1.7% in employment over the next 12 months. This growth is set to apply to all sectors apart from banking.Share Tweet