Wednesday, 29 August 2007

Market turmoil knocks UK business

Fewer people went shopping over the bank holiday weekend
Confidence among business in the state of the UK economy has been hit by fears that the US house price slump will have global ramifications, a report says.

BDO Stoy Hayward's latest monthly index, which measures expectations for the next six months, fell to 101.2 in August from 101.9 in July.

This marked the lowest point since November 2005.

The figures came as research firm SPSL said fewer people went shopping over the bank holiday weekend than in 2006.

Volatility debate

The fall in confidence in the UK's economic prospects was registered across the board by small and large businesses, the manufacturing and service sectors, said BDO.

Economic conditions in Europe and America are relatively benign
Peter Hemington, partner, BDO Stoy Hayward

Confidence is expected to fall further next month, with the fall-out from the US sub-prime lending crisis set to lead to tighter conditions for bank lending.

"Our view is that the volatility in financial markets will not persist into the medium term," said BDO partner Peter Hemington.

"Economic development in China and India remains a strong driver of world growth and the economic conditions in Europe and America are relatively benign."

However, the survey suggested that businesses expect inflationary pressures to stay high.

BDO expects that the Bank of England's policy committee could raise interest rates at its November meeting, adding to the five rate rises since August last year.

In a separate report, SPSL registered a drop of 10% in the number of people out shopping on Saturday and Sunday over the weekend compared with the same point last year, as the sunny weather drove holidaymakers to enjoy outdoor pursuits. Footfall was 9.7% lower on the bank holiday Monday.

"Sales have been extended to sell off old stock, which has stimulated consumers to carry on shopping, but we foresee tough times ahead," the firm concluded.

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