UK businesses see green shoots of recovery, says survey

The latest quarterly survey by the Institute of Chartered Accountants in England and Wales shows that the index of business confidence rose to -28.2 at the end of March, from -45.3 at the end of the previous quarter.

''The rise in confidence is a positive step. The underlying data suggests that companies have heeded warnings, taking the right steps to ensure their businesses are positioned to survive the downturn," said Michael D M Izza, chief executive of the institute.

More than 1,000 chartered accountants were surveyed across England and Wales.

''Businesses were managing the consequences of the global recession remarkably well", Izza said adding that "while the change in outlook is encouraging, I still believe that difficult times lie ahead. I would urge businesses to not be complacent and be measured in any steps they take in response to an economic recovery."

Though the index has increased 17 points from the first quarter of 2009, it is still a long way off from the 4.8 measured in the third quarter of 2007, the last time the index was positive, the institute noted.

Last week, the Office of National Statistics said the output of the UK economy fell by an unrevised 1.9 per cent in the first three months of 2009 and household spending dropped 1.2 per cent, the biggest decline since 1980.The only sector of the economy making a positive contribution to growth was government spending.

The return of business confidence suggests that the economy is crawling out of deep recession, though gradually.

The poll has registered declines for the past 18 months, but is now showing an improvement in the banking, finance and insurance sectors and the property market.

One in five business professionals questioned are still much less confident about the next year, indicating the recovery may be some months away.

Sentiment improved across all UK regions and counties for the first time since the survey began in 2003. The West Midlands saw the largest increase, which is thought to be a result of recent measures to help the auto industry, such as the scrappage scheme.

The North of England remains the least confident region, the researchers found. More than 1,000 chartered accountants were questioned for the study.

The rate of economic contraction is now lower than the free-fall and near-depression experienced by many economies in the fourth quarter of 2008 and the first of 2009. However, the businessmen are optimistic that the ''green shoots'' of recovery will lead to the recession to bottom out by the middle of this year.

Earlier in the month, the closely watched manufacturing Purchasing Managers' Index (PMI) rose to an eight-month high of 42.9 from 39.5 in March, better than the 40 level expected by economists.

Given that numbers below 50 indicate a contraction in activity, and numbers above indicate a rise, the sector is still in decline but the pace of that decline has receded to the slowest rate since August 2008, an analyst said.

Pension assets up to £418 billion
Meanwhile, a report by the Aon Defined Contribution (DC) Pension Tracker said that the total defined contribution pension assets have surged for the second month in a row, rising 10 per cent in April to £418 billion.

The report, released yesterday, claimed that the increase was due to a recent "bullish performance" by global equity markets.

But pension pots still have a long way to go to recoup the losses sustained during the past one year. The tracker estimates that a further 32 per cent increase is required to bring DC assets back to their September 2007 value of £550bn.

Helen Dowsey, principal at Aon Consulting, said: "Global stock markets have seen one of the strongest rallies ever over the last month which has had a positive effect on the projected retirement income for UK retirees.

"Unfortunately because annuity rates are still low this has wiped out some of the investment gain."

She added: "However, given DC pension pots have fallen dramatically since the beginning of the credit crunch it is far too early to say we are witnessing a recovery as yet."

The report also calculated that a worker retiring on their 65th birthday in January this year would have received £266 less a year than someone who worked their final shift in April, due to the previous volatility of the equity markets.