Latest UK growth surge 'confounds forecasts'

A survey of almost 1,000 company directors has suggested unexpectedly strong growth throughout the UK economy last month.

4 April 2023

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The survey, conducted by the Institute of Directors (IoD), found that order books had strengthened considerably since the turn of the year, and that expectations of future revenue, hiring and investment were all pointing upwards.

Economic outlook enjoys a spring bounce

In a statement, the organisation said the findings "confounded official forecasts from the Office of Budget Responsibility of a contraction" in the first quarter of the year.The survey comes on the heels of research last week by the Confederation of British Industry (CBI) that found, after a sluggish 12 months, private sector activity was expected to return to growth in Q2 – the first time of positive expectations for growth since April last year.A majority of manufacturing firms expected to see a recovery in output in the next three months, while business and professional services were confident of a return to growth, according to the CBI.

Wider optimism

Now the IoD has found that business leaders are not only optimistic over the prospects for their own organisations in the coming 12 months, but also have growing confidence in the future of the wider UK economy.Kitty Ussher, chief economist at the IoD, said: “The data coming from our members is strongly suggestive of growth across all sectors in recent weeks. In particular, the strengthening of order books since the end of last year points to an economy performing better in Q1 than was anticipated as recently as the March Budget.“While this is undoubtedly good news, strong demand also means that it may take longer than many forecasters currently expect for inflation to come within sight of the Bank of England’s target any time soon.”The survey, conducted across all sectors of the economy between March 10-26, found that half of all firms reported that their order books had strengthened since the end of last year, with only 22 per cent saying their orders had weakened.

Confidence at two-year high

On the question of the UK economy as a whole, the organisation's 'Directors’ Economic Confidence Index' rose to its highest level since late 2021. Director confidence in prospects for their own organisations also rose. Other survey findings:

61 per cent of business leaders expected their revenues to grow in the coming year, compared to only 18 per cent who feared their revenues to weaken.
37 per cent anticipated increasing their companies' headcount in the next year.
38 per cent expected to increase investment over the next year.

The IoD added: "However, the survey also showed that inflation expectations remain high. Only 28 per cent of members said that they believed inflation had already peaked, down from 33 per cent in February. Some 50 per cent said they did not expect it to peak until the summer at the earliest."

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