By Marcus Leach
The latest findings from BDRC Continental’s Business Opinion Omnibus reveal a significant decline in economic optimism, as small to medium sized enterprises (SMEs) fear that Britain may dip back into recession.
SMEs optimism in the economy fell significantly from a net balance of +4% in July to -12% in August. This month’s drop marks the lowest economic optimism levels since March 2009, and comes after six months of relatively stable net optimism ratings.
The decline in overall optimism was most marked amongst the smallest businesses. Those with less than 10 employees remain the most pessimistic, with a net score of -16%. Those with 11-50 employees saw the biggest change in August, down 21 points, but remaining positive (+5%). The net optimism ratings of the bigger businesses, (50-250 employees), was stable month-on-month (at zero).
Trading prospects declined for the third consecutive month, with manufacturing experiencing the greatest fall in confidence
SMEs confidence in their own trading prospects also fell this month, moving from a net balance of +31% in July to +21% in August. Trading prospects have fallen steadily since May indicating that SMEs are gradually losing confidence. They remain far more optimistic about their own prospects than those of the wider economy.
Manufacturers had a net balance of +14% for their trading prospects, a significant decline on +37% in July. This fall both mirrors their declining confidence in the economy more generally (down 51 points to -27%) and is also in line with results from a recently published SME trends survey from the Confederation of British Industry (CBI) which reported growing pessimism amongst manufacturers.
Trading prospects for the services industry have remained relatively high at +32%, falling 6% since last month. Retail and distribution remain the least confident sector with a net balance of just +9%, falling from +16% last month.
“August has been a challenging month for the global economy with the downgrading of US credit ratings, considerable concerns within the Euro, and closer to home, rioting in Britain all of which will have impacted SME sentiment," Shiona Davies, Director of Financial and Business to Business Research at BDRC Continental said.
"This month’s Business Opinion Omnibus results have reflected the growing concern amongst SMEs and are a strong indication that businesses fear a double-dip recession. This is now starting to impact on optimism amongst SMEs for their own business, albeit SMEs remain more confident about their own prospects than those of the economy more generally.”
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