UK Firms Have Made Dramatic Scaling Back Of Investment Plans, Finds Latest Survey

A leading business survey in the United Kingdom has revealed that companies have dramatically scaled back investment plans for the rest of the current year because of the uncertainty of the future of the country’s economy which has been hit hard by the novel coronavirus pandemic.

The survey was conducted by the Institute of Directors (IoD) which noted that its confidence tracker showed a 11 per cent decline in the investment intentions among its members for the next 12 months, reaching a record low of -43 per cent, because of the pandemic related economic crisis.

Despite some easing of the severe lockdown in the country, investment and hiring intentions “plumbed new depths” last month, found the monthly survey. It also however noted an enhancement in the overall confidence of business owners have in the economy that showed a better result – reaching -60 per cent from -69 per cent.

Companies were more confident that they would be able to recover compared to the broader economic situation, said Tej Parikh, the IoD’s chief economist. However the report cautioned that it was too early to say anything about whether a corner had been turned towards recovery for the small and medium-sized businesses in the country that make up the bulk of the IoD’s membership.

Government support would be needed by businesses throughout the recovery process or else companies out not be able to survive, he said issuing a warning to ministers.

“The government must pull out the stops this summer. If it holds back too much ammo for later in the year, firms’ recoveries will be slowed,” he said.

There are concerns within the UK Treasury and the Bank of England about companies deciding to postpone spending on new plant and machinery, IT systems and upgrades to ageing properties in their effort to meet the economic challenges of Covid-19, which will further hit he economy even after the current bout of pandemic is over.

There has been increasing pressure of the UK government to announce tax cuts and other incentives so that consumers and businesses are enticed to spend more so that it would be possible to prevent the current recession turning into a depression that could last for several years.

“When the furlough scheme ends, employment could take a hit. The government should help companies fill the gap by reducing the cost of hiring. With cash tight, smaller firms could also benefit from tax breaks to adjust to the new normal, while the debt businesses have built up will hold back the economy unless it’s addressed,” Parikh added while referring to the employment protection scheme that pays employees 80% of their wages if they cannot work.

A study on the cancelled investment decisions of listed companies was conducted prior to the IoD survey based report which had predicted that the cancellation had reached as much as £23bn.

In a survey poll last month, the IoD had found that 51 per cent of the 720 company directors participating in the survey had said that their recovery efforts were being hampered by their growing debt obligations. The same survey had revealed that 57 per cent of the companies would scale back all most of their investment plans for the next two years to mitigate the hit by the pandemic.

(Adapted from TheGuardian.com)



Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability

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