Markets soar as accountants cheer us up

The recession is over - at least according to a new survey of business confidence among accountants.

by
Last Updated: 31 Aug 2010

An accountants’ trade body has just recorded the biggest rise in confidence in two years in its latest member survey. The Institute of Chartered Accountants in England and Wales reports that confidence jumped from -28.2 to +4.8 during the last quarter, so we’re back in positive territory for the first time since 2007 – while 13 of its 14 economic performance indicators were expected to rise. This ‘suggests the UK recession is at an end,’ says ICAEW chief exec Michael Izza, who’s now predicting that the economy will grow by 0.5% this quarter. And judging by the big bounce in the FTSE this morning (currently up around 4,900 again), the markets seem to agree with him…

You may be forgiven for wondering why we should care about the opinion of these 1,000 accountants. But the ICAEW’s quarterly study is widely regarded as a pretty accurate barometer of business confidence (clearly those bean-counters have their fingers on the pulse), so a jump like this does suggest UK plc is feeling rather more optimistic about the future than it has done for – well, about two years. Izza reckons Government measures like quantitative easing and the VAT cut have helped businesses weather the storm (which should win him some brownie points in the Treasury) while the self-inflicted pain of job cuts has also played its part.

There’s certainly lots of optimism around on the stock markets. The FTSE 100 rose above the 4,900 mark this morning, a hike of over 1%, after a big jump in Asian shares overnight and some relatively positive comments from US Federal Reserve chairman Ben Bernanke. Even Lloyds and RBS are up, which is saying something (maybe all the City traders are over-excited after watching us win the Ashes yesterday). When you think that the FTSE was around the 3500 mark back in March, it’s remarkable how quickly it’s rebounded.

Or perhaps alarming, depending on your point of view. Although confidence is clearly improving, everyone seems in agreement that recovery will be a long hard slog – some economists are even warning of a ‘double-dip’ recession, where the economy heads south again as soon as the massive government stimulus packages dry up. Only this morning the CBI warned that the service sector was still in recession last quarter, while even the life-and-souls-of-the-party at ICAEW (if that’s not a contradiction in terms) described our chances of recovery as ‘very fragile’. So we don't really understand why everyone seems to be buying shares again like there’s no tomorrow...


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