Positive outlook for local economic growth

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Finance professionals across the UK are upbeat about the prospects for local economic growth in their regions in 2005 and are confident that their organisations will grow profits during the year too.

The findings of the latest Accountancy Age/Allied Irish Bank regional business-health survey show that almost half of UK accountants expect to see moderate to significant growth in the coming year.

This is despite major concerns about a shortage of skilled labour, identified by the survey as the biggest barrier to economic growth.

Professionals in London, the southeast and east of the country were the most optimistic, with 61% predicting local economic growth.

In the southwest, 55% of businesses said they anticipated growth in 2005, while 49% of survey participants in Wales, Scotland, the northwest and northeast forecast a growing economy. The midlands emerged as the least positive region, with only 42% of businesses expecting growth in the year ahead.

More than half of the respondents in each region also expected growth in the profitability of their organisations, with London, the southeast and east again performing well, with 65% of businesses expecting growth, closely behind the northwest and northeast, which polled 66%.

Karl Heffernan, Allied Irish Bank’s area director, said stable interest rates are the major factor supporting the outlook for growth.

‘Interest rates have stabilised, although they are slightly higher than they were at the same time last year. However, hopes that they are at, or near, their peak will certainly help to boost the market,’ said Heffernan.

The general optimism did not seem to be tempered by the poor performance of the manufacturing sector in the survey, even though the sector emerged as the largest single source of revenue in every region.

Of the businesses surveyed, 44% perceived the manufacturing sector as unhealthy, with a further 43% indifferent to the sector’s prospects. The next worse performing sectors were property and retail, where 13% of those polled remained negative in their outlook.

Heffernan, however, believed that the negative perceptions surrounding manufacturing were exaggerated.

‘In our experience, manufacturing companies operating in niche areas, which produce innovative products, for which there is demand and which are well managed, will continue to thrive in 2005.’