UK businesses are looking forward to a buoyant 2015 despite jitters over the outcome of the general election and the impact of the stronger pound on the recovery.
The optimistic outlook in Britain is in contrast with much of the world – with the exception of the eurozone, where a growing number of firms that expect this year to be better than the last.
Chris Williamson, the chief economist at Markit, said the response of British firms was remarkable given that the global economy faces many risks and the general election in May could add to domestic uncertainty.
The proportion of UK firms that say they expect higher output and orders in the coming year has declined since 2014, but they remain the most optimistic of respondents from any major economy.
Williamson said: “It’s looking good for the UK now that major export markets in the eurozone are feeling in better shape, especially Ireland. But there are risks in the global economy and some countries, like Brazil and Russia in a dire situation, with both unlikely to avoid recession.”
He warned that looking at the survey in its broadest terms, the global measure of sentiment found that companies were the least optimistic than at any time since 2009, pushed down by a waning outlook in the US.
Globally, the proportion of companies expecting activity to be higher in a year’s time exceeds those expecting a decline is +27%. But this net balance is down from 28% last October and 40% a year ago. Optimism in the service sector fell to its lowest since the survey was first conducted in 2009, while manufacturing optimism remained “well below par”.
Job creation was also hit by the jittery outlook with hiring intentions down to a new survey low. Markit found that investment intentions only picked up modestly from October’s trough.
Williamson said: “The survey at least points to a more equal distribution of global growth. While expectations about business activity fell in the fast-growing US and UK economies, prospects have improved in the eurozone, Japan and China.”
He said UK businesses could be proved to be overly optimistic if the US economy slows too sharply, as America is the global economy’s main growth engine.
“Optimism and hiring intentions among US firms hit the lowest since the survey began in 2009, linked to worries about the strong dollar and rising interest rates. Companies are also signalling a slowdown in the UK economy this year. However, with the exception of Spain and Ireland, the UK looks set to be the fastest growing economy in 2015.
“The UK’s remarkable run of strong growth therefore looks set to continue, with firms largely brushing aside worries about the euro crisis, Russia, the possibility of higher interest rates and uncertainty due to the upcoming general election.”
