Billions of pounds held back from economy by uncertainty

Unemployment to rise as companies lack confidence to invest stockpile of funds

Business are braced for a bleak second half of the year, with finance chiefs prepared to sit on billions of pounds their companies have stockpiled as confidence plummets, while a sharp fall in the number of staff placements fuels fears that the unemployment rate could hit three million in UK again.

The latest monthly report on jobs from KPMG Rec shows wages stagnating as both permanent and temporary appointments fell last month at the fastest rate since July 2009.

"After five months of consecutive growth, the latest data comes as a sobering reminder that we're far away from a confident economic situation," Bernard Brown at KPMG said. "If this trend were to continue, there's a very real chance we could hit a three million unemployed figure in the UK in the not too distant future."

Meanwhile Deloitte's second-quarter finance survey, which questioned 137 finance directors, including 39 from the FTSE 100 and 57 from FTSE 250 companies, shows the sharpest decline in corporate confidence since it was started in 2007. It marks a reverse on the first quarter which showed confidence rebounding.

It is echoed by a survey from BDO Business Trends that found business confidence at its lowest point this year, with optimism in the manufacturing sector in particular slumping in June to the lowest level since March 2009.

Economists are worried that manufacturing data on Thursday could show another fall in output in May, after a sharp drop was recorded in April.

Deloitte said sentiment has now seen three major dips in the space of five years.

Its survey, one of the most authoritative polls of opinions of the executives with their hands on company purse-strings, also found they are actively preparing for the ejection of one or more countries from the euro by the end of the year. More than a quarter say plans for coping with a break-up of the single currency are "made" or at "an advanced stage", against 18 per cent in the first quarter. They rate the chance of it happening at 36 per cent, up from 26 per cent in the first quarter.

Their mounting fears over the economy means they have adopted defensive strategies including avoiding any risk – four in five say now is not a good time to take risk on to company balance sheets. This is despite an apparent ready access to finance, with just 4 per cent of them citing the cost or availability of credit as having influenced changes to their investment plans.

While they said availability was declining, it is still not difficult for large corporates to borrow, and the cost of what can be obtained, they told Deloitte, is lower than at any time in the last five years.

By contrast, 82 per cent said that expected demand for their goods and services together with uncertainty about the economic environment were having far more influence on recent capital spending decisions.

That bodes ill for those hoping that companies will start to spend cash on investing in their businesses to stimulate the economy.

Ian Stewart, Deloitte chief economist, said uncertainty was having "a corrosive effect on risk appetite".

"In an indication of the challenge in getting corporates to invest their cash reserves and drive UK economic growth, 95 per cent of CFOs rate the current financial and economic uncertainties facing their business as being above normal," he warned.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor