The City is riding high. World stockmarkets are rallying and the FTSE 100 hit a six-month high earlier this week, rising by more than one quarter from its March low. But is everything as rosy as it seems?
Manufacturing remains depressed, despite the dramatic fall in the pound, and while house prices are still edging up, the rate of increase is slowing.
In an attempt to understand what it all means for UK plc, The Independent asked 10 of the country's leading businessmen for their views on whether the UK economy has turned the corner?
Philip Bowman, chief executive of Allied Domecq, the drinks group:
"The UK climate remains very tough and we see no indication that a corner has been turned in terms of a feel-good feeling. In fact, perhaps, there has been a hardening of the situation. However, we are resilient as a sector."
Philip Scott, head of UK life business at Aviva, Britain's largest insurer:
"It is good to have the depth of uncertainty which we had back in March behind us. Over all, the underlying economy is business as usual. The economy had been reasonably strong in 2002 and that strength has carried on in 2003.
"One question that remains outstanding is the residential property market. We are seeing a little bit of bounce there but I wonder whether that is just seasonal and a slight recovery from the first quarter rather than a fundamental trend.
"The impact of the fall in the stock market in the last three years will take some while to get full confidence back into equity markets."
Sir Martin Sorrell, chairman and chief executive of WPP, the advertising group:
"In the UK, no [it hasn't turned a corner]. The stockmarket operates in advance of what we see physically, maybe six, nine, 12 months ahead. In the short-term, for the balance of the year at least, things will continue to be difficult.
"It's tough stuff as far as the UK is concerned. In the US, we are possibly seeing some signs of stability. The media buying market was up 15 per cent on last year, but that may suck money out of other media. It's difficult to believe clients will actually increase spending by 15 per cent.
"Continental Europe, if anything, has been a bit better than the UK, but that might be something to do with our business rather than the market. Asia has been growing despite Sars, and there is some sign of recovery in Latin America."
Tim Clarke, chief executive of Mitchells & Butlers, Britain's biggest managed pubs group:
"We are fairly cautious on the outlook for overall consumer spending. We have undoubtedly seen some moderate signs of recovery in London since the end of the war [in Iraq]. But it's far too soon to be calling an upturn. We'll just keep an eye on the situation and provide what our customers want.
"On the high street things are increasingly competitive and trading remains difficult. It's about chronic oversupply as much as fragile consumer confidence. So we have to focus on attracting guests and differentiating our product. But it's a given that people are still going out and having a meal or some drinks."
David Michels, chief executive of Hilton, the hotels and Ladbroke gaming company:
"As far as betting goes, the strength of the business reflects the strength of the economy and disposal income and there is certainly disposable income for those who like to bet for their hobby, which is certainly a positive sign.
"In hotels, the UK market outside London is suprisingly strong. It has really held up vastly better in a corporate sense than almost any of the other 80 countries we operate in - certainly better than Continental Europe. In London, where more than 50 per cent of the business relies on foreign visitors, things haven't [held up so well]."
Matthew Barrett, chief executive of Barclays:
"The UK economy continues to look pretty stable. The housing market is coming off the boil, but not at an alarming rate. The growth in consumer borrowing is subsiding gently towards more sustainable levels. At the same time, rapid growth in government expenditure is counter-balancing the slowdown on the consumer side, assisted by the slide in the pound.
"So GDP growth this year should broadly match last year's performance - say a little under 2 per cent. This is still below trend, so unemployment and excess capacity may continue to rise, but the silver lining should be lower inflation in a few months' time and further cuts in base rates."
Gerald Corbett, chairman of the high street retailer Woolworths:
"I don't think the UK economy is going to be a disaster. But I think it is going to be difficult. House price growth has stopped in some areas. Tax rises, in the form of national insurance increases, are now coming through strongly which is affecting the amount of money people have to spend. Pensions are decimated and the pound has weakened, which has always historically brought in some inflation.
"I don't think consumer spending will collapse but the period of buoyant increases in consumer spending is over. We are into an area when there is likely to be more price deflation and slower increases in consumer spending.
"Companies will have to work a lot harder to generate good increase in profit. Investors need to look for companies with good cashflow, good market share and the potential to cut costs."
Alan Giles, chief executive of HMV, the music retailer:
"I don't think things are getting any worse. There does seem to be a greater sense of optimism in the equity markets, which is encouraging. I do think that since the end of the [Iraq] war there seems to be a somewhat more stable consumer mood. But I feel there are fairly significant different regional patterns between the Midlands and the North where consumer confidence remains quite buoyant, and the South-east and London where conditions are more subdued."
Mike Clasper, chief executive of BAA, the airports group that owns London Heathrow, Gatwick and Stansted:
"We expect traffic growth to slow this year because of the sluggish world economy and capacity constraints. We expect passenger numbers at our seven UK airports to rise by 3 to 4.5 per cent compared with a 4.7 per cent increase last year. Our retail revenues [which now account for more than half of the group's total income] will be affected by how quickly high-spending Asian customers begin flying again in the aftermath of the Sars virus."
Paul Heiden, chief executive of FKI, the engineering group:
"In general, there is really no change in the market. It's not improving or getting worse. There are no signs of growth in any of our markets but it appears to be stable. There's no trend in orders or sales, which vary from week to week. [Things] are bumping along the bottom and we expect the challenging conditions seen in the second half of last year to continue.
"Pensions are a new cost to cover this year, with our contributions set to increase by £20m. This is affordable but it is unclear how long the volatile pension deficit will be there."
VIEW FROM THE TOP
Matt Barrett: 'The housing market is coming off the boil, but not at an alarming rate'
Gerald Corbett: 'Economy is not going to be a disaster'
Philip Scott: 'Good to have uncertainty behind us'
Sir Martin Sorrell: 'In the short-term, for the balance of the year at least, things will continue to be difficult'
Alan Giles: 'I do think that since the end of the [Iraq] war, there seems to be a somewhat more stable consumer mood. But there are significant different regional patterns'
David Michels: 'The UK hotels market outside London is surprisingly strong. It has held up vastly better than almost any of the other 80 countries we operate in'
Tim Clarke: 'We have undoubtedly seen some moderate signs of recovery in London since the end of the Iraq war. But it's far too soon to be calling an upturn'Reuse content