IoD says business optimism is bouncing back

UK companies report growing optimism about the future in new figures released last week. The latest business opinion survey from the Institute of Directors (IoD) revealed a resurgence of confidence from the declines seen over the summer and autumn of last year. However, optimism is still below the levels seen a year ago.

The figures, covering the final quarter of 2004, also reveal business confidence, performance, profitability and investment is much stronger in the service sector than in manufacturing.

Graeme Leach, Chief Economist at the IoD, said:

“The latest survey is surprisingly upbeat. Company performance and optimism is very strong in the service sector. Unsurprisingly, company performance and optimism is notably weaker in the manufacturing sector. ”

Specifically, the NOP survey of 500 directors, found:

• The balance of those companies more, rather than less, optimistic about their company’s prospects, rose to 37% in the latest survey up from 31%.

• The balance of companies performing well, rather than badly, jumped to 82%, up from 67%. While 84% said their company is performing well, only 2% believe their company is performing badly.

• Profit expectations are also improving. The balance expecting profits to go up (over the next 3 months), compared to those expecting them to fall, rose to 40% in the latest survey from 37% previously. Profit expectations remain at the high levels seen throughout the past year.

Graeme Leach, said:

“IoD members are far more confident about the outlook for their own companies than for the UK economy. Remember the Chancellor is forecasting 3% to 3.5% GDP growth this year, but a huge 81% of IoD members think that GDP growth will be 2.4% or less.”