The Institute of Chartered Accountants in England and Wales (ICAEW) has revealed that UK plc experienced a dramatic drop in confidence so far this year. Its Business Confidence Monitor (BCM) fell from -3.9 in Q4 of 2007 to -7.2.
And news that producer prices are soaring won’t do much to get those chins back up. The ICAEW is also predicting that interest rate cuts, such as the Bank of England’s 5.25% cut of last Thursday, will help avoid a recession. That may take a bit of a hit if the latest figures from the Office of National Stastics are anything to go by. Price inflation of goods leaving UK factories has reached its highest rate in 16 years, driven higher by petrol and food costs. And prices paid by factories for their raw materials surged by 18.7% in the last 12 months. Analysts say this could hold back the Bank of England from further rate cuts.
With oil prices up, and house prices slowing dramatically, the UK economy is expected to experience its slowest rate of growth for 15 years. We were hoping the ICAEW’s bleak report was simply a case of accountants painting a typically dour picture of things. Wishful thinking, perhaps.