This view is supported by a recent Global Economic Conditions Survey (GECS), which looked at business confidence for the first quarter of 2015, carried out by ACCA and IMA.
The GECS report found evidence of improving economic conditions across the world, as positive sentiment amongst businesses increased in the quarter, suggesting there is a sense of economic optimism in the market. For the UK, the report saw capital investment has risen substantially and greater investment in staff development.
In fact, the survey found that CFO confidence is amongst the highest levels since the survey began in 2009. These are encouraging statements which show heightened confidence in future prospects for the UK market.
This is also encouraged by the end of uncertainty surrounding the outcome of the general election and threat of deflation which made many business professionals feel uneasy at the beginning of the year.
Business opportunities
This is the second quarter in a row the GECS report has highlighted that business confidence is on the rise, with positive sentiment in Q1 2015 of this year appearing far more prominent than previously. Confidence is beginning to take hold within the business environment. So why are we witnessing such an improvement in positive feeling Well, for a number of reasons.
During times of economic uncertainty, CFOs are typically concerned about suppliers or customers going out of business or receiving late payments, which would delay their organisation’s progress. Now, however, this is becoming less of a problem. As we recover from the recession and markets improve, business processes in the supply chain become more stable, thereby increasing confidence in it.
A feeling of optimism is flowing through businesses, with 22 per cent of respondents overall reporting an increase in more profitable opportunities in Q1 2015 compared to previously. Add to this that 23 per cent said that they are seeing new jobs being created in their business, shows that companies are more willing to invest in the future.
Alongside this, the latest ONS figures released just last month revealed unemployment in the UK has continued to fall and the number of people in work has continued to rise, according to the latest official figures. The number of people out of work in the January to March period fell to 1.83 million, down 35,000 from the previous quarter and the lowest for seven years.
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Strong increases in activity in the business and professional services sector as well as sustained growth in retail highlight promising indications of increasing business and consumer confidence. This is also reflected by signs of increased spending power which has been helped by low inflation and rising wages crucial for stimulating further recovery.
With the creation of more jobs and apprenticeships resting at the top of the newly elected governments agenda, this is also an encouraging signal that economic recovery is taking shape.
However, there are still some reservations from the market. While green shoots are visible, there is still some uncertainty over how long the recovery will take. For example, global trade is experiencing a slowdown in growth, with the World Trade Organisation has reducing its forecast for trade growth to four per cent in 2015 while the Delta Economics forecast is currently just 1.4 per cent in 2015. Both suggest that there are still reasons to be cautious.
Continue reading on the next page for why small to medium businesses are more upbeat about the future.
Image: Shutterstock
SMEs more optimistic
Looking at these global trade forecasts, they may also explain why the GECS report showed that CFOs of larger companies were more pessimistic than those working in smaller businesses, with 35 per cent of respondents from larger companies feeling less confident than three months ago, compared to 30 per cent from SMEs.
Larger UK companies tend to be international, and therefore more likely to be affected by uneven recovery and rely on solid economic performance in different markets. Whereas a large number of UK SMEs tend to operate just within this market and so arent exposed to these varying issues in the same way.
This increasing confidence amongst smaller businesses is encouraging to see, particularly as we also note that banks are now actively lending more to SMEs through the Funding for Lending Scheme, perhaps signalling further good things to come.
Despite these figures, there is still a way to go before the global economy can be said to have made a full recovery. Recovery is still seemingly a work in progress . The optimism is tempered by continuing uncertainty as some markets around the globe remain fragile and prone to sudden changes, which are a surprise for businesses.
However, it is certainly encouraging to see that businesses are investing more in people, becoming less worried about the supply chain and beginning to take more risks, all areas which help in leading to a more sustained recovery for the UK.
Alan Hatfield, executive director strategy & development with ACCA
