Business Factors Index turnover points to negative growth as confidence slumps in Q4

Business performance fell back in the fourth quarter of 2011, according to a study of the turnover of small to medium sized businesses in the UK. The results are in line with predictions of negative GDP growth for the same period which is expected to be confirmed by the ONS on January 25.

Activity was down by 0.4 per cent according to Bibby Financial Services’ Business Factors Index which has been charting the turnover of its 4,000 UK clients since 2007, from a base point of 100. The latest measurement shows that turnover was down overall from 105.3 to 104.9.

The slight downturn comes after two consecutive quarters of growth and has been driven by a five per cent drop in the construction sector and a 2.8 per cent fall in manufacturing.

Although activity across the wholesale, business services and transport and distribution sectors has seen a modest rise. The results of the index are in line with predictions from think tanks such as the Centre for Economics and Business Research (CEBR) which is forecasting negative growth in the economy for both Q4 2011 and Q1 2012.

The quarterly index report from invoice finance specialist Bibby Financial Services, also analysed the outlook of business owners during Q4, which revealed that almost half (47 per cent) do not believe the UK economy will recover for at least three years – more than double the 23 per cent which said the same during the fourth quarter of 2010.

The decline in business optimism mirrors the findings of the Federation of Small Businesses Index which recorded its lowest level of confidence among small to medium-sized firms since 2010.

Year-on-year the levels of optimism are also down as 60 per cent of businesses in the fourth quarter of 2010 said they expected to see a recovery within two years, which has dropped to 45 per cent in Q4 2011.

Edward Rimmer, UK chief executive for Bibby Financial Services, said the issue of business funding is yet again going to be crucial for business owners in 2012 as confidence in economic recovery has fallen so far.

He says: “The perception at the start of 2011 among a lot of businesses was that we may be at the start of the recovery. A year later and the feeling is dramatically different as the eurozone crisis, stagnant economic growth and the decline on our high streets have presented huge challenges.

“The data from our quarterly Business Factors Index has recorded a dip in performance for Q4, due in part to the challenges in the manufacturing sector caused by the uncertainties of the eurozone crisis.

“The construction sector also started the quarter badly because of public sector projects being put on hold or cancelled, and a number of contracts coming to an end relating to the London Olympics, which had an effect on overall performance.

“But over the course of 2011 the Index has seen consecutive sectors of growth which gives a more positive picture of the past 12 months.

“What is important for 2012, when the economic outlook is less positive, is that businesses get the access to funds they require which will help them grow over the next year.

“Bibby Financial Services works with thousands of businesses around the UK providing invoice finance facilities which enables them to take control of their cashflow, and gives them the freedom to focus on building for the future.

“Small and medium-sized businesses are at the heart of the economic engine in the UK and without long term funding plans in place and access to finance to ensure the sustainability of those businesses, the economy is going to continue to struggle in its recovery.”

Posted in Bibby Financial Services updates by Julia Legge on 24 January 2012.

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