“Consumers squeezed in January despite falling inflation”. “Bank gloomy on prospects for revival in jobs market”. “Osborne given little room for manoeuvre”. “Advanced economies suffer fall in growth”.
These stories have graced the pages of British newspapers over the past few weeks, but what do the people ‘on the ground’ think? Not the people who draft the policies, or draw the graphs, but those who create goods and services, employment and wealth? The IoD has been hearing from members that business people are unhappy with all the doom and gloom in the media. So through our survey platform Policy Voice we recently conducted a poll of directors’ opinions on the UK’s economic prospects for 2012. The picture was, if not completely rosy, certainly pinker than the headlines would suggest.
Of the 1000 business leaders surveyed, just 1 in 3 think there is a high or very high risk of recession in 2012, whilst 53% think the risk is moderate. In sharp contrast to the recent deep recession, directors believe that any future recession would be mild. Of those believing there is a prospect of recession, 43% say it will be short and mild and 33% long and mild.
Although the macroeconomic outlook is uncertain, directors are relatively optimistic about their own businesses’ prospects this year. Half of those surveyed expect their revenues to be higher or much higher this year than last, and just 27% expect them to be lower. Profits are also looking positive, with 40% of companies anticipating an increase in profits in 2012, compared with 32% who foresee a fall in profitability.
Business leaders are still lacking in confidence, however, and are unwilling to take risks as a result. 29% expect their business investment to be lower in 2012, against 27% who think it will be higher. Employment prospects were similarly balanced, with just 27% of directors anticipating greater staff levels this year, and 25% expecting to hire less people.
What is making business leaders so risk averse? That stubborn enemy of certainty, the ongoing eurozone crisis, is a major factor – 1 in 2 directors think there is a high or very high risk of a euro break-up this year. Graeme Leach, Chief Economist at the IoD, concludes:
“The resounding message from the survey is the critical role of confidence at this stage in the economic cycle. If the euro-crisis stabilises, confidence could return relatively quickly and companies could dust down business investment and recruitment plans put on hold last year. Alternatively, if the euro-crisis gets worse, confidence is highly unlikely to return this year.”
So how did the media respond to directors’ calls to end the doom and gloom? Favourably is the answer – the survey results were covered by The Financial Times, The Times, The Daily Telegraph, the Wall Street Journal Europe, City AM, BBC News online and the BBC News Channel. Some still picked out the negative findings, but the FT announced that “Companies stay confident over economic outlook”, whilst the Telegraph reported “IoD shrugs off double-dip recession fear”. Let’s hope that directors’ outlook for the economy becomes a self-fulfilling prophesy.
To join the Policy Voice panel, email email@example.com with your IoD membership number.