Survey reveals double-dip fears

| July 5, 2010 | 0 Comments

A survey by accountancy firm Deloitte has revealed confidence among finance directors of Britain’s leading companies has dropped to its lowest for a year.

The study found two-thirds believe that their companies will be affected by the major cutbacks in Government spending.

In addition, according to the study, 38% believe there is a risk of a double-dip recession - whereby the economy goes into recession twice without having undergone a full recovery in between.

Meanwhile, confidence among finance chiefs has now fallen for two consecutive quarters.

However, on a positive note, the survey found that pressure on balance sheets is easing and medium-sized firms are on target to increase profits in the next two years.

The report comments: “The cash crisis in the corporate sector has abated significantly and corporates are more bullish about prospects for their own cash flow than at any time in the last two years.

“Crucially, credit conditions are getting better. Sentiment about credit availability is now at the highest level since the survey started three years ago,” it added.

The survey, conducted for Ernst & Young, reviewed 500 companies with a turnover of at least £20 million and with 250 or more employees.

In related news, many economists have previously said that the Government’s massive spending cuts could pose a threat to the economic recovery.

Last month, Professor David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee (MPC), warned that cutting the deficit too quickly risks putting the UK back into recession.

Mr Blanchflower, said: “I think if these plans are implemented it is almost certain that we are going to have a double dip recession.

“The issue is: where is the growth coming from in the economy?. We need a plan for growth, we shouldn’t be cutting now”, he said.

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