Manufacturing decline creates executive paranoia, but the City is back on top

Confidence in the UK economy has yet to return, according to a survey of business leaders by The Institute of Directors (IoD). The report, produced in association with workplace consultancy Croner, highlights a pessimistic prognosis for economic growth over the next quarter. Two-thirds of the 220 senior directors surveyed said they thought the economy would worsen before getting better. Fifty-seven per cent reported that sales in their own companies remained stagnant.

There were, however, brighter conclusions for the future. Respondents were far more positive about the chances of an upturn over the next 18 months, with 65 per cent predicting a more prosperous 2010. "It is heartening to hear that two thirds of executives are optimistic about growth prospects in 2010," said Miles Templeman, Director General of the IoD. Respondents identified business services as the sector offering the "greatest opportunity for work and therefore growth", he said, "with local and central government and the NHS as being the next three sources for business wins, ahead of manufacturing."

The latest manufacturing figures released by the Office for National Statistics show a fall in output of 1.9 per cent, representing the lowest level since 1992. Many economists had predicted a slight rise. The decline was driven largely by poor performance in the paper, printing and publishing industries. The figures have called into question the UK's ability to mimic France and Germany's improving economies. Economists at Credit Suisse predicted "very weak or negative" third-quarter GDP.

There was mixed news for the UK's financial services sector. The World Economic Forum's Financial Development Report has labeled the City the world's most developed financial system, but also branded it one of the most unstable, below Nigeria and Panama in a table of 55 global economies. The WEF's Development rankings reflect how easy it is to access finance and the ease with which governments can borrow money on international markets. The UK scored poorly for stability based on its role in the banking crises, on its current account balance relative to GDP and also on foreign investment relative to GDP.

Co-author of the report Nouriel Roubini, the New York University economist known as Dr. Doom as a result of his pessimistic views, said the report underlined London's role as the world's premier financial hub. "London and the UK are looking ahead of New York and the United States," he said, adding that Britain's strength showed both in "banking and non-banking activities". However, said Roubini, "financial instability weighed heavily on both" the US and the UK.

Posted 9 October 2009 : Director.co.uk