By Max Clarke

Optimism among UK privately held businesses (PHBs) on their economic outlook for 2011 has fallen over the last year, according to the latest International Business Report (IBR) survey from finance and business advisors, Grant Thornton UK LLP.

According to the annual survey of 500 UK PHBs optimism fell to a percentage balance of 8% this year, a decrease of eight percentage points from the 16% recorded a year ago. This makes businesses in the UK one of the least optimistic in the European Union and the lowest when excluding those EU economies experiencing sovereign debt troubles;
Spain (-50%),
Ireland (-45%), and
Greece (-44%).

PHBs in Germany are the most optimistic at 75% followed by those in
Finland (+57%),
Belgium (+45%) and
the Netherlands (+19%) which are all experiencing high levels of business confidence going into 2011. France is only just ahead of the UK at +10%.

Despite the fall in optimism, the expectation of UK PHB for revenues and profits in 2011 increased slightly. 65% of PHBs predict a rise in revenues over this year, compared to 58% a year ago. In addition, 58% of PHBs expect their profits to increase in 2011, compared to 55% that expected a rise in profits in 2010.

Expectations for employment however are not as hopeful. The survey reveals that only 37% of PHBs expect employment levels in their business to increase in 2011. This is a fall from last year's results where 34% predicted employment to rise in 2010. A decline is also expected in the prices for goods and services sold this year. The report shows that only 36% of PHBs expect their selling prices to increase in 2011. This is a fall from the 28% of PHBs that expected an increase in their prices for goods and services sold in 2010.

David Maxwell, partner in Grant Thornton says: "The decrease in the optimism of private companies in the UK strongly indicates that businesses are experiencing significant uncertainty over the economic climate.

"With an unstable financial market, a rise in unemployment and access to finance remaining tight, privately held businesses have decreased their expectations to increase staff numbers in their firms. In addition, fewer businesses in 2011 predict a rise in the price of their goods and services compared to the previous year.

"Despite the pessimism in some areas, many private companies in the UK adopted strategies to ride out the recession. This may be one reason why PHBs increased their expectations for a rise in revenue and profits by paying close attention to strategies that boost their turnover and market share, and by focusing on cash flow."