Confidence in UK economic outlook wanes among finance professionals
Accountants and finance professionals’ confidence in the UK economy fell by 12 points in the fourth quarter of 2021, due to the rapid spread of the Omicron Covid-19 strain, the latest results of a global survey of their views have revealed.
Conducted in late November and early December at the start of the outbreak, ACCA (the Association of Certified Chartered Accountants) and IMA® (Institute of Management Accountants) The Global Economic Conditions Survey (GECS) shows that the confidence index fell significantly by 22 points among UK respondents, from 24 to 2, alongside lower expectations about capital expenditure and employment.
The only index to rise in the UK was orders, from -3 to 2. This index is the proxy for real economic activity and is one of the relatively small changes across all regions. This points to modest GDP growth at the start of 2022.
Lloyd Powell, director of ACCA Cymru/Wales, said:
“Accountants are often the first to feel the impact of economic activity, informed by the work they do every day to support savings and by feedback from their clients, particularly in the small business sector. The overall picture is one of tentative optimism, but for the UK we can very clearly see Omicron’s uncertainty and inflation playing out in the minds of respondents.
“In 2021, the UK economy grew by nearly 7%, a significant rebound from the 9.7% contraction of 2020. With the likely risk of rising inflation eroding real disposable incomes and compressing consumer spending, our members continue to worry about the impact on the survival of small businesses and stay ready to offer advice on how to navigate the recovery. The Chancellor’s spring economic forecast will be key to understanding what lies ahead.
The ACCA says that while much of the rise in inflation can be attributed to one-off supply factors, there is a demand pull element as some households have built up a large stock of “excess” savings. during times of lockdown restrictions and these savings are a source of consumer demand. The ACCA predicts GDP growth of around 4.5% this year, spurred by a recovery in business investment.
Looking at specific jurisdictions, trust fell the most in Western Europe by 28 points, which was the first region to see a rapid spread of Omicron. Confidence rose slightly in two regions: Asia-Pacific by five points and North America by 10 points. Only the Middle East recorded a drop in the orders index of six points, with South Asia posting the largest increase at +8 points.
Explaining the outlook for 2022, Loreal Jiles, Vice President of Research and Thought Leadership for IMA, said:
“ACCA and IMA estimate that 2022 will see further progress towards a more normal economic environment with global GDP growth of around 4%. Features of this return to normal include reduced household savings offsetting the withdrawal of Covid fiscal support, easing supply shortages and continued growth in employment levels. Although Omicron may slow economic growth due to its effect on consumer spending and worker absenteeism, the impact on global economic activity is expected to be modest and likely to be relatively short-lived.