A glimmer of light
Amid the darkness, it’s heartening to hear confidence is rising among small and mid-cap quoted companies
By Ben Griffiths | Published 10:33, 29 May 12
Last week the confirmation that Britain is stuck in the first double-dip recession since the 1970s came as the Office for National Statistics said GDP slipped by 0.3 percent in the first quarter. When the figures were first announced the fall was 0.2 percent. In essence, the situation is worse than it first appeared and comes on top of the 0.3 percent decline in the last three months of 2011.
Nevertheless, responses to the latest sentiment index report from the Quoted Companies Alliance - which represents small and mid-cap companies on the stock market - was upbeat and revealed renewed confidence about the country’s economic prospects.
Produced for the QCA by accountants BDO, the report found optimism in the UK economy has risen sharply from 40.9 in January to 47.3 in April - where everything below 50 represents pessimism. Individual companies also feel more confident.
Crucially, and of particular interest to George Osborne and Sir Mervyn King, the respondents said they were not seeing the trends identified by the ONS growth statistics. Not only that, but they are planning to invest in growth.
QCA chief executive Tim Ward says his members are also more confident about securing the finance they need to grow and create new jobs. But he adds that they need the backing of government, the banks and market operators to help them deliver.
The report reveals that 40 percent of small and mid-cap companies expect to raise finance in the next year and 38 percent of companies would consider turning to public equity if the need for finance arose in the next 12 months.
The QCA’s findings are once again an important message to Westminster. Some of the nations’ most up-and-coming businesses are unrelentingly positive about their future prospects, they believe they can get the funding to grow and they can help us drive the economy back into growth. It would be an obdurate government that chooses to ignore this potential economic lifeline.
Of course, isolated surveys should always be taken with a pinch of salt. Other influential commentators have warned that the latest GDP figures could depress sentiment among businesses.
The British Chambers of Commerce warned back in April that the debate about a technical recession - two quarters of negative economic growth - risked diverting attention away from the real issues affecting the economy.
Policymakers should focus on resolving the protracted period of low growth and the urgent need to find better ways of helping British businesses, the real engine of economic growth, to fuel our ascent out of the double dip.