Businesses and consumers still wary about economy

A recent report has suggested that business and consumers across the UK are still wary about the outlook for the economy, despite assurance that the economy is heading towards some degree of recovery. Although various industry groups and government officials have tried to make the economic outlook appear to be somewhat brighter than many people see it, to many consumers and businesses the fragility of the economy means that any recovery could quickly be overturned.

The recent Service Sector Survey from the Confederation of British Industry showed that in the last quarter there had been an unexpected fall in sales. Around 48 percent of firms in business services reported a fall in profits and in consumer services there was a drop of 34 percent in profits. GfK NOP, the market research agency, carried out a survey that showed that there had been a knock in consumer confidence levels. Based on its index levels this was the first drop in consumer confidence in more than a year.

With households continuing to feel the pinch the report claimed that they were less likely to make larger purchases, although these figures may have been affected somewhat by the Christmas season. The accountancy firm BDO released a recent Business Trends report, which also painted a bleak picture when it suggested that the Bank of England’s ‘predictions of a strong recovery for 2010 are likely to prove too optimistic’.

However, on a lighter note the manufacturers’ association, EEF, said that for the first time in a long while businesses had seen credit conditions easing up to some degree, which could help to get the wheels of industry, and subsequently the economy, moving again. Lee Hopley from EEF said that credit conditions for businesses were definitely beginning to show signs of improvement.

Tags: Consumer behaviour, BDO, bank of england, consumer confidence, Confederation of British Industry