Business surveys dampen hopes of imminent recovery

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THERE are still scant signs of an economic recovery in the UK, according to two business surveys published yesterday. Any upturn, when it comes, will be slow and severely hampered by the demanning and destocking that British companies have undergone in the struggle to survive.

Trade Indemnity, the credit insurance group, warned in its latest business failures survey that an end to the recession was still 'proving elusive'.

Business collapses for the last three months of 1992 were expected to be 1 per cent higher than the previous quarter, the reverse of the usual seasonal drop in the run-up to Christmas.

Barbara Bennett, a spokeswoman for Trade Indemnity, commented: 'British companies have moved heaven and earth to reduce gearing. This will make it difficult for these companies to expand when the recovery arrives, especially when customers don't pay on time.'

Ms Bennett said that UK companies had entered the recession heavily borrowed, and had then been forced to cut staff and stocks in the struggle to survive. This vulnerability had been compounded by Black Wednesday, which had increased the prices of imported and dollar-denominated raw materials.

Lloyds Bank yesterday launched a new six-monthly business confidence survey covering 1,465 middle-market companies with turnovers between pounds 1m and pounds 50m. While most businesses polled by Lloyds said they were confident of 'some upturn in the next six months', the bank reported a 'striking lack of confidence in the construction industry' and 'pessimism among retailers due to lack of demand'.

Michael Riding, general manager of Lloyds Bank Commercial Service, said: 'A lot of people think that because things are so bad in the construction industry, they cannot get any worse. Our customers are saying things will get worse.'

Since the beginning of the recession Lloyds had quadrupled the number of staff in Mr Riding's 1,000-strong department providing 'intensive care' to customers under pressure, he said. There are now roughly 200 staff working to save companies from collapse in the middle market division alone. 'I hope this figure won't go up,' Mr Riding said.

The Lloyds survey warned that the construction industry, 'already battered by the recession, is expecting a further decline in orders, turnover and profitability, over the next six months'.

Over 80 per cent of construction companies polled by the bank said they thought their sector as a whole was less confident than six months previously. Only 3 per cent thought that the sector was more confident.

Mr Riding said that small companies in all sectors would find it difficult to finance themselves coming out of the recession, because of the restocking and subsequent extra borrowing it would entail.

He was also struck by the depth of pessimism in the Midlands and North Wales, compared with London and the South-east, which are relatively optimistic.