UK sees 'turbo-charged' rise in business optimism

After a winter when the UK economy suffered a hammering not just from the Covid-19 pandemic but also from the end of the Brexit transition period, there were clear signs on Tuesday of a widespread recovery.

Data from the Office for National Statistics (ONS) showed that, after a disastrous January, exports to the EU jumped by 46.6 per cent in February, accompanied by 0.4 per cent GDP rise in the economy at large.Additionally a survey conducted by Deloitte among the chief finance officers of the UK's largest companies showed confidence over profits in the coming year had hit a record high.And the quarterly 'Business Barometer' from Hitachi Capital Business Finance revealed that the percentage of SME owners predicting growth has jumped in the first quarter to its highest level in four years.The export figures from the ONS came after a 42 per cent fall in January when companies were struggling with new EU trade rules following the end of the transition period."The economy showed some improvement in February after the large falls seen at the start of the year but remains around eight per cent below its pre-pandemic level," an ONS spokesman said."Exports to the EU recovered significantly from their January fall, though still remain below 2020 levels. However, imports from the EU are yet to significantly rebound, with a number of issues hampering trade."Rory Macqueen, principal economist at the National Institute of Economic and Social Research, said: "Clearly much of the economy has adapted to cope with Covid-19 restrictions. If the vaccine programme and lifting of restrictions continue on schedule this provides a firm basis for continuing growth in the second quarter and 2021 overall." The Deloitte survey showed that, on the back of the rollout of Covid-19 vaccines and as Brexit disruption fears faded, CFOs at major companies were not only expecting higher profits in the coming year, but also increased hiring and investment.Almost ten per cent of CFOs reported that their companies had experienced significant or severe disruption owing to Brexit but only three per cent now expect that level of disruption to persist in a year’s time.
Ian Stewart, Deloitte’s chief economist, said: “Brexit has been a significant dampener on business activity in the last four years but with the UK’s final departure from the EU, such effects are fading. Combined with a successful vaccine rollout and a greatly improved global backdrop we are seeing a turbo-charged surge in business optimism.“Having come through the deepest downturn in 300 years UK businesses are firmly focused on growth. Pent-up business and consumer demand are set to power a strong profits recovery, one already anticipated by the surge in equity markets since February.”Among SMEs, Hitachi found that growth forecasts had returned to pre-Covid levels, with confidence highest in London, Yorkshire and SE England.The 'Business Barometer' found that, in the first three months of the year, SME business owners predicting growth leapt to 36 per cent from 26 per cent in Q4 of 2020 – the highest quarter-on-quarter rise for four years.

Read more news and views from David Sapsted.

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