According to the study carried out by accountants at BDO Stoy Hayward, UK businesses are likely to see a revival in the beginning of 2006. In spite of the fact that output has declined, business confidence has enjoyed a turnaround. The study also expects Bank of England to keep interest rates on hold for this month.
The BDO optimism index, which is an indicator of GDP growth in the future, has risen from 100.4 in July to 101.2 in October. This indicates an economic growth of slightly over 3 per cent in the second quarter of 2006. Peter Hemington of BDO Stoy Hayward feels, "The UK economy is looking healthy for the beginning of 2006". He adds: "Business confidence is up, helped by the fact that interest rates fell by a quarter of a point in August."
Bank of England had lowered its benchmark interest rate in the month of August after a gap of two years when economic growth slid to a 12-year low in the second quarter of this year. This has helped boost market sentiment say the researchers at BDO Stoy Hayward. The growing confidence in service sector is also, however, not shown by manufacturing sector, which is still lacking in confidence.
Though the BDO report does not foresees signs of a recession in UK, there are no indicators of "a return to the trend growth of around 3% that would enable the Chancellor to achieve a significant reduction in public borrowing".
Douglas McWilliams, chief executive of the Centre for Economics and Business Research feels that there would be continuing uncertainty over the coming months due to high energy costs and hurricane damage in the US. He adds: “Currently UK businesses are expecting a rebound in growth in 2006, but if prospects start to deteriorate, this quarter's rise in the inflation index may make it more difficult for the MPC to cut rates.”
Posted
on : Mon, 31 Oct 2005 15:15 GMT | Business News
By : Mark Richardson
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