2012 Economic Outlook is Grim

Posted on: 22.11.2011    07:14:28

The continuing Eurozone crisis has caused a sharp fall in confidence among senior business leaders and the possibility of a second banking crisis is weighing heavily on corporate sentiment, the CBI has said.

Following telephone interviews conducted with senior business figures from the FTSE 350, and privately and foreign-owned companies of a similar size operating in the UK the CBI has announced the following findings:

  • 70% said their level of confidence in the economic outlook had fallen since the beginning of August.
  • 30% of business leaders believe their company’s prospects have deteriorated,
  • 57% saying business prospects stayed the same,
  • 11% saying business prospects had improved.

However there is great fluidity in the market place:

  • 59% are likely to revise their business strategy
  • 38% are changing workforce plans
  • 33% are reviewing investment plans
  • 30% are revising expansion plans
  • 28% are altering their financial plans.
  • 39% are not making changes, but some are planning to ‘wait and see’ before reaching decisions.

Despite the sharp fall in confidence and the increase in economic uncertainty, 82% of business leaders said they were behind the Government’s deficit reduction strategy and do not believe that it should be scaled back.

When asked which specific areas the Chancellor should focus on in his autumn statement to stimulate growth, 80% said investment in infrastructure should be a priority, followed by cutting employment taxes (57%), business taxes (48%) and income taxes (42%).

In 2012, business leaders believe that the most serious risks to their business will be volatility in financial markets (37%), lack of domestic demand (36%) and rising costs (23%).

The sovereign debt crisis in the Eurozone is seen by 70% as the biggest single factor likely to impact on the UK economy in 2012, and the possibility of a further banking crisis cited by 67%.

Business leaders were asked what single Government action would most improve the outlook for UK business going into 2012. Recommendations included:

  • Improve the flow of credit
  • Develop a credible growth strategy
  • Clarify all aspects of energy policy
  • A clear strategy which achieves business and consumer confidence
  • Encourage business confidence so firms reinvest the surplus cash they are sitting on
  • More support for exporters
  • More investment in infrastructure

2012 is going to be very tough but there are still opportunities although continuing skills shortages will present challenges and need to be tackled ahead of actual demand. Global demand is impacting on the UK recruitment market creating inflationary pressures.

Commenting on the CBI’s findings Chris Slay of recruitment agency Skills Provision said “In the recruitment cycle those with in demand skills are looking beyond our shores with working in Australia being increasingly popular. Although the fabled Polish workers are still available the UK market is less attractive with the skilled Polish workers looking for better terms and conditions than the UK market is willing to pay. Employers facing these challenges need to work more hand in glove with their chosen recruiters as the need to scour Eastern European markets might be necessary to find the right talent to fill the skills gap and it takes time.”

We are in danger of talking ourselves into another recession and whilst we must remain realistic it is very much a time for a half full glass mentality than a half empty one.


Author – Chris Slay

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