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30 December 2002

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Conflicting economic signals frustrate company planners


Confusing economic signals are making it difficult for business leaders to plan growth strategies with any confidence, according to Cambridgeshire directors.

The latest Institute of Directors’ quarterly survey among Cambridgeshire business leaders reveals a continuing deterioration in business optimism but only a slight weakening in general company performance.

Stephanie Smye, chairman of the IoD’s Eastern Branch, said: “Despite the slowdown in the world economy, latest financial figures indicate that the performance of the UK economy remains robust, apart from the manufacturing sector which is in recession.

“House prices are continuing to rise, the retail sector has had its best Christmas since 1987 and both interest rates and inflation are very low. The problem is that business leaders do not know how the international situation may change. Most analysts expect economic growth of only one per cent in the USA and European Union this year and a decline of one per cent in Japan.

“However, a further global shock similar to the September terrorist attacks or a deeper and more prolonged downturn could change the whole picture. In the UK we still do not know whether the consumer spending spree is using up money that would have been spent on foreign holidays or whether it is an after-shock reaction to the September terrorists attack.

“It all makes it very difficult to plan business strategies, although most indicators suggest the UK’s robust economic growth is expected to continue through to the autumn.”

The IoD’s survey calculates business opinions by subtracting the number of respondents who give a negative answer from those giving a positive answer to arrive at a percentage ‘balance’ figure.

Based on this, most companies in the south region that includes Cambridge reported slightly better than average economic indicators. A balance of 10 per cent were more optimistic than they were three months previously while 75 per cent reported that their company was performing well. However, minus 23 per cent were operating at full capacity while eight per cent reported above normal order books.

In the Midlands region, which includes Peterborough, optimism and performance were both lower than the national average at seven per cent and 64 per cent respectively. While capacity utilisation at minus 11 per cent was not as bad as the minus 21 per cent nationally, order books at minus one per cent were significantly lower than the national six per cent figure.

While a lower-than-average 26 per cent of Midlands firms reported output growth in the three months under review, a higher-than-average 39 per cent were expecting output to grow in the next three months.

February 2002

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