UK edging towards double dip recession

News Article - 24 September 2010
Category: Business

Experts have warned the country may soon face a double dip recession as confidence amongst UK businesses falls to its lowest point of the year. If businesses do not push forward with key investments and take steps to stimulate the labour market, economic contraction could start as early as Q4 2010.

The fall in confidence is predominantly a response to austerity measures proposed by the coalition Government. Many firms have pledged to cut costs and slow down recruitment drives to improve profit margins and ensure stability amid fears the Government's cost cutting will destabilise major markets.

Economic growth has slowed in the last few months according to BDO's Output Index, which tracks the sales expectations of UK companies. The Index fell from 99.8 to 97.8 between July and August, following a strong 1.2 per cent increase between April and June. However, this slowdown was expected by experts following the rapid growth of Q1 and Q2 2010, which was seen as unsustainable in the long-term because of unstable domestic demand.

Whilst unstable demand will no doubt make 2011 a rocky year for many companies, economic growth is likely to pick up amid low interest rates. Yet fears of a particularly rough 2011, and excessive media hype over the Government's austerity measures, may convince some companies to put off important investment decisions and recruitment drives which would help to stabilise operations now the economy has improved.

If enough of the market responds in this way, the economic outlook for the early part of 2011 may become bleak. While the Government's cost cuts will no doubt affect the market, experts predict this will not happen until 2012. Yet this is unlikely to stop many companies consolidating their workforce at a time when the labour market needs significant investment. According to the TUC, 2.2 million private sector jobs will need to be created for the market to make up the 10 per cent job loss expected in the public sector.

With economic conditions over the next six months so uncertain, companies must ensure internal operations are working at optimal levels in order to make the most of market conditions if the UK economy starts to contract again. Access financial software can help companies protect profit margins: when taking orders, staff are instantly warned if discounts take the sale price below the cost price -with optional visibility of the profit margin - giving the option to proceed or not.

For more information, please call Access on 0845 345 3300.

Article keywords: double dip recession, economic growth, financial software, profit markets, labour market, Coalition Government

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