The British Chambers of Commerce’s latest Quarterly Economic Survey points to encouraging signs for the UK economy. The survey, comprising almost 8,000 responses from businesses across the UK, shows a welcome improvement on the results of Q4 2011 which pointed towards stagflation.
While the results are more encouraging than the previous quarter, they show that growth is still weak, with the balances still below those seen in 2007 before the recession (balances are determined by subtracting the percentage of companies reporting decreases in a factor from the percentage of companies reporting increases).
Many manufacturing balances are now at a satisfactory level, but the service sector balances are sluggish.
Balances measuring domestic and export activity across firms showed welcome increases, and more businesses are looking to invest in employing more staff, training, and plant and machinery. However, cashflow is still a real problem, and despite concerns about inflation decreasing, recent increases in oil and food prices may alter this over the next few months.
Commenting on the results, John Longworth, Director General of the BCC, said: “It’s encouraging to see that businesses are feeling more confident at the start of 2012 than they were at the end of 2011.”
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He added: “The UK economy is still facing huge challenges and the recovery is much too slow. The UK has the potential to recover, but to achieve that the government has to set businesses free to grow.”
David Kern, the organisation’s Chief Economist, said: “The results of the Quarterly Economic Survey point to a welcome but modest improvement in the economic situation. The UK economy will likely avoid a recession.
“Our forecast for 2012 GDP is 0.6%. Our prediction is lower than that of the OBR [Office for Budget Responsibility, the UK’s fiscal watchdog] for two reasons. Firstly, we are still concerned that the unresolved problems in the eurozone may trigger new upheavals later this year. Secondly, in view of the increases in oil and food prices since January, our current forecast is that the fall in UK inflation over the next 12-18 months will be slower than first expected.”
Equity markets are certainly more optimistic about the UK economy than they were last year. The FTSE 100, often seen as a leading indicator for the UK economy, is up a healthy 5.17% year to date. Moreover, with over half of revenues for FTSE 100 companies coming from overseas, UK companies should benefit from recent sterling weakness and faster growth in the rest of the world.
For investors looking to access UK equities, there are a number of London-listed ETFs to consider, offering exposure to large-cap, mid-cap, small-cap and high-yielding companies.
iShares FTSE 100 ETF (ISF)
FTSE 100 Source ETF (S100)
Credit Suisse MSCI UK Large Cap ETF (CUKL)
Credit Suisse FTSE 100 ETF (CUKX)
Lyxor FTSE 100 ETF (L100)
ComStage ETF FTSE 100 TR (8H81)
HSBC FTSE 100 ETF (HUKX)
Amundi FTSE 100 ETF (C1UG)
DB X-trackers FTSE 100 ETF (XUKX)
Lyxor FTSE 250 ETF (L250)
HSBC FTSE 250 ETF (HMCX)
Lyxor ETF FTSE 250 (250F)
DB x-Trackers FTSE 250 ETF (XMCX)
FTSE 250 Source ETF (S250)
iShares FTSE 250 ETF (MIDD)
ComStage ETF FTSE 250 TR (8H82)
Credit Suisse MSCI UK Small Cap ETF (CUKS)
DB X-trackers FTSE 250 ETF (XMCX)
Amundi FTSE 250 ETF (F25A)
DB X-trackers FTSE All-Share ETF (XASX)
ComStage ETF FTSE All-Share TR (8H80)
Lyxor FTSE All-Share ETF (FTAS)
SPDR FTSE UK All Share ETF (SPYF)
Credit Suisse MSCI UK ETF (CSUK)
Amundi MSCI UK ETF (CUK)
SPDR S&P UK Dividend Aristocrats ETF (SPYG)
Amundi FTSE UK Dividend Plus ETF (AUKD)
iShares FTSE UK Dividend Plus ETF (IUKD)
PowerShares FTSE RAFI UK 100 ETF (PSRU)
Ossiam FTSE 100 Minimum Variance ETF (UKMV)
ETFX FTSE 100 2x Leveraged ETF (LUK2)
ComStage ETF FTSE 100 2x Leveraged TR (8H84)