Global growth fears hit hopes for UK economy
PROSPECTS for Britain's economy this year are solid but manufacturers have adopted a cautious approach due to growth and political worries, two surveys have revealed.
The proportion of firms who think economic conditions in the UK will improve dropped sharply at the end of last year to just 37 per cent - roughly half last year's figure.
That led the Engineering Employers' Federation survey to warn that "with all these factors on the horizon, the jury is out over whether 2015 will be a year of risk or opportunity".
The chief reason is that 38 per cent of respondents now expect global economic conditions to take a turn for the worse, up from just five per cent last time around.
Significant shifts in exchange rates were also cited as a risk factor to watch out for.
Not even a week into the New Year, markets have already seen unusual strength in the US dollar against both sterling and the Euro.
Nevertheless, just under half of the manufacturers canvassed for the survey still expect to increase their staff numbers.
Likewise, seven out of ten executives continue to believe that Britain will still be a competitive business location for them in 2015.
The results of Lloyd's semi-annual Business in Britain study were considerably more upbeat.
The uncertainty in Europe and across the globe more wdely in the second half of the year has clearly affected intentions to export
Yet the report also found that business executives had moderated their optimism over the last six months.
"The uncertainty in Europe and across the globe more wdely in the second half of the year has clearly affected intentions to export," the survey reported.
However, it is chiefly growing concerns over the Eurozone which are responsible for the worsening outlook for sales overseas.
Expectations for sales to the US and especially the Asian region held up much better.
Construction and manufacturing businesses saw the biggest falls in confidence in contrast to the retail and wholesale sectors, where positive sentiment among managers actually increased.
In addition, 16 per cent of companies expect to increase capital expenditure in the next six months - the third highest reading on record.
That figure is important because company investment plans are a leading indicator of prospects for the British economy over the coming year.
The figure will also come as welcome news to the Bank of England's Monetary Policy Committee given the importance of sustained investment in driving long-term gains in productivity.
Trevor Williams, chief economist at Lloyds Bank Commercial Banking, concluded that although companies have become more concerned over global growth prospects, economic activity will mature into a more sustainable pace over the coming months,
