Blow for George Osborne as London firms predict double-dip recession
Russell Lynch
28 Nov 2011
The scale of the task facing Chancellor George Osborne to jump-start a stalling recovery was underlined today as alarming figures revealed nearly two thirds of the capital's small businesses are braced for a double-dip recession.
The centrepiece of Osborne's eagerly awaited autumn statement tomorrow is expected to be a ÂĢ40 billion loan guarantee scheme to cut borrowing costs for small firms starved of credit.
But industry surveys revealed plummeting confidence in the business world on the eve on the Chancellor's crucial address. It came as the OECD think-tank predicted a winter recession, slashed growth forecasts for next year to just 0.5% and called on the Bank of England to pump tens of billions more into the economy.
Travelex's latest survey of the capital's exporters and importers revealed 59% of London's small businesses expect a renewed slump, up from 39% in June. Two thirds of London businesses believe government efforts to boost exports have been a damp squib and half believe an export-led recovery is unlikely as Europe's debt crisis saps the life out of the British economy.
Firms are "worried about survival in the current climate", Travelex director Paddy Earnshaw warned. He said: "London is one of the most important trading centres in the world and it's not surprising that SME confidence has been affected by the current downturn. The Chancellor needs to set out clear plans in his autumn statement that tackle their fears over growth and economic volatility."
Lloyds Bank added to the gloom as its latest business barometer warned the UK would stagnate in the current quarter and shrink in the first three months of next year.
The bank's economic prospects index, a strong indicator of future activity, sank to minus 20% in November, the weakest since early 2009 when the country was mired in recession. Businesses in the South are in the grip of an alarming slump in sentiment and, even more worryingly for the Chancellor, the confidence crisis is spreading to the services sector.
Hopes for the rally are hingeing on services firms, which account for around two thirds of the economy, but flagging consumer confidence has triggered profit warnings from High Street retailers and the malaise has spread to other services firms, Lloyds warned.
It said: "The decline was driven by the retail and other services sectors and suggests that the initial negative impact of the euro area sovereign crisis on the industrial sector is now spreading more widely to the service sector."
The British Chambers of Commerce also slashed its growth forecast for next year to 0.8% and called for "bold measures" to boost infrastructure and help exporters.
Rescue 'too late to stop new slump'
Emergency measures to pump-prime the British economy could still be too late to avert a double-dip recession, experts warned today.
The City is braced for slashed growth and a big rise in borrowing from the Office for Budget Responsibility's latest economic forecasts tomorrow.
Colin Ellis, chief economist at the British Private Equity and Venture Capital Association, said: "It's all come just a bit too late. If we can get new projects and schemes up and running swiftly, it might make the difference. But even then I think we'll be skirting double-dip for the next six months or so."
Lloyds Bank Corporate Markets economist Jonathan Thomas added: "It will make a difference at the margins but it is going to be overwhelmed by what is happening in Europe at the moment."
Russell Lynch
28 Nov 2011
The scale of the task facing Chancellor George Osborne to jump-start a stalling recovery was underlined today as alarming figures revealed nearly two thirds of the capital's small businesses are braced for a double-dip recession.
The centrepiece of Osborne's eagerly awaited autumn statement tomorrow is expected to be a ÂĢ40 billion loan guarantee scheme to cut borrowing costs for small firms starved of credit.
But industry surveys revealed plummeting confidence in the business world on the eve on the Chancellor's crucial address. It came as the OECD think-tank predicted a winter recession, slashed growth forecasts for next year to just 0.5% and called on the Bank of England to pump tens of billions more into the economy.
Travelex's latest survey of the capital's exporters and importers revealed 59% of London's small businesses expect a renewed slump, up from 39% in June. Two thirds of London businesses believe government efforts to boost exports have been a damp squib and half believe an export-led recovery is unlikely as Europe's debt crisis saps the life out of the British economy.
Firms are "worried about survival in the current climate", Travelex director Paddy Earnshaw warned. He said: "London is one of the most important trading centres in the world and it's not surprising that SME confidence has been affected by the current downturn. The Chancellor needs to set out clear plans in his autumn statement that tackle their fears over growth and economic volatility."
Lloyds Bank added to the gloom as its latest business barometer warned the UK would stagnate in the current quarter and shrink in the first three months of next year.
The bank's economic prospects index, a strong indicator of future activity, sank to minus 20% in November, the weakest since early 2009 when the country was mired in recession. Businesses in the South are in the grip of an alarming slump in sentiment and, even more worryingly for the Chancellor, the confidence crisis is spreading to the services sector.
Hopes for the rally are hingeing on services firms, which account for around two thirds of the economy, but flagging consumer confidence has triggered profit warnings from High Street retailers and the malaise has spread to other services firms, Lloyds warned.
It said: "The decline was driven by the retail and other services sectors and suggests that the initial negative impact of the euro area sovereign crisis on the industrial sector is now spreading more widely to the service sector."
The British Chambers of Commerce also slashed its growth forecast for next year to 0.8% and called for "bold measures" to boost infrastructure and help exporters.
Rescue 'too late to stop new slump'
Emergency measures to pump-prime the British economy could still be too late to avert a double-dip recession, experts warned today.
The City is braced for slashed growth and a big rise in borrowing from the Office for Budget Responsibility's latest economic forecasts tomorrow.
Colin Ellis, chief economist at the British Private Equity and Venture Capital Association, said: "It's all come just a bit too late. If we can get new projects and schemes up and running swiftly, it might make the difference. But even then I think we'll be skirting double-dip for the next six months or so."
Lloyds Bank Corporate Markets economist Jonathan Thomas added: "It will make a difference at the margins but it is going to be overwhelmed by what is happening in Europe at the moment."