Accountants’ economic confidence edges up for third consecutive quarter

Improvements in economic conditions and fading fears of a 2023 recession have seen global businesses confidence rise for the third consecutive quarter, according to a new survey of the accounting profession.

Published today, the ACCA and IMA’s quarterly Global Economic Conditions Survey (GECS) reports that global confidence is now above the median of the past decade, with much of the progress owing to a “striking” 30-point surge in Western Europe. Marginal upticks were also recorded in Asia-Pacific, North America, South Asia and Africa.

Several other metrics also showed improvements, with orders, capital expenditure and employment all up quarter-on-quarter. Additionally, the GECS’ ‘fear’ indices (made up of concern about customers and suppliers going out of business) both showed an uptick on the quarter, with worries about suppliers now at their lowest level since 2020.

Jamie Lyon, head of skills, sectors and technology at ACCA attributes much of the improvements to businesses “coming to terms with the fallout from the Russia-Ukraine war”, in addition to the stabilisation of energy prices in Europe.

“That should help to reduce headline inflation and may bring about a pause in central banks’ tightening of monetary policy,” he says.

But Lyon goes on to argue that it may be premature to sound the “all clear”, noting that in the 12-month picture, confidence is still down across every single region with the exception of Asia-Pacific.

“This suggests that this may be less about a global rebound, and more about an unwinding of the recession fears that were at their most intense in both North America and Western Europe during the second half of 2022 and which have turned out to be premature,” he says.

UK economy not ‘out of the woods’

While ONS figures earlier this year showed that Britain narrowly avoided a recession – defined as two consecutive quarters of economic contraction – in 2022, the picture remains bleak, with the nation’s annual inflation now at the highest level in Western Europe.

March figures depicted a consumer price inflation rate of 10.1% – 0.3 percentage points lower than the month prior, but far greater than the 9.2% predicted by the Bank of England in February.

Similarly damning for the UK’s economic outlook, data from last month also shows that corporate insolvency increased by nearly 38% from February, and nearly 16% compared to March 2022 – the highest levels for more than three years.

Tim Symes, insolvency and restructuring lawyer at Stewarts, calls the surge in insolvency rates “jaw-dropping”, arguing that this spells further danger for the UK’s productivity.

“Any suggestion that the UK’s economy is out of the woods looks fanciful against this bleak picture,” he says.

Echoing these concerns, Christina Fitzgerald, president of insolvency trade body R3, argues that businesses must continue to stay alert for further challenges, with costs continuing to rise, consumers cutting back on spending, and the government’s energy bill relief scheme having concluded at the end of March.

“Many businesses will be facing further increased in costs at a time when they can ill-afford them. Directors need to be vigilant about the signs of financial distress and seek advice as soon as they spot issues with their business or begin to worry about its finances.”