PwC survey reveals fears over double-dip recession

| January 31, 2010
”PwC

A survey by accountants PricewaterhouseCoopers (PwC) revealed that many business managers are concerned that Britain is heading towards a double-dip recession (whereby the economy goes into recession twice without having undergone a full recovery in between.)

Last week, official figures revealed that the UK economy grew by 0.1% between the October and December period, suggesting that the economy had finally emerged from its worst recession since records began in 1955.

However, the figures were far worse than expected with economists forecasting growth of around 0.4%.

The economy, which contracted for six consecutive quarters, has been lagging behind other major economies with Japan, Germany and France all exiting recession in the second quarter and the US emerging from recession in the third quarter.

Overall GDP fell by a record 4.8% in 2009, suggesting a sluggish recovery in 2010.

In the meantime, the PwC survey found that executives in London and the north of England are the most wary of a double-dip but four regions of the UK reported an improvement in growth expectations since the start of 2009, but a considerable amount of uncertainty still remains.

PwC found that a lack of credit and “lacklustre business confidence” are among the main areas that firms are concerned with.

Business clients in the Midlands were sceptical about banks’ claims of increased lending, but clients in the south-east of England reported that bank lending appeared to be improving.

Meanwhile, many business leaders in the City believe that the new super tax (introduced to claw back some of the bailout funds used to rescue the banking industry) would hit entrepreneurship and could see senior executives flee the country.

The findings from PwC’s survey are similar to those from accountancy firm Ernst & Young, who recently said firms should brace themselves for “a bumpy recovery”.

Keith McGregor, restructuring partner at Ernst & Young said: “Growth in the first part of the year could sit in contrast with economic stagnation or even a second dip later on.”

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