Owner-managed firms optimistic

OWNER-MANAGED businesses are twice as confident about economic prospects as they were six months ago, according to a survey of chief executives and finance directors by Ernst & Young, the accountants, writes Roger Trapp.

London and the South-east showed the most dramatic improvement, with 66 per cent of companies expecting the economy to improve, compared with 28 per cent at the end of last year. Overall, the figure rose from 32 per cent to 64 per cent.

The report, published last week, showed that output is expected to increase by an average of 5.7 per cent over the next 12 months - the most optimistic assessment since the end of 1991. It also provides the healthiest picture of employment prospects for 18 months, with 36 per cent of companies expecting to hire more staff. However, the survey of 600 executives of companies with turnover ranging from pounds 5m to pounds 100m, carried out by Mori, indicated that any recovery will be patchy. While 47 per cent of businesses have seen increased orders or inquiries, 44 per cent have not yet seen signs of recovery.

There is also divergence between sectors. Manufacturing shows an above-average level of confidence of 71 per cent, while the service and retail/distribution sectors reveal 63 per cent and 61 per cent respectively. Jock Lennox, head of services to owner-managed businesses, said: 'The economic outlook has improved significantly. There are some real signs that activity is on the way up.'

But he warned that this would raise questions about how businesses should finance this increased activity. The survey indicates that most will look to traditional sources - generally bank borrowing.

The fact that 68 per cent had found this relatively easy to secure suggested that banks were 'attempting to play their part' by injecting some momentum into the recovery, Mr Lennox added. This might mean that there are fewer corporate casualties than is usual during the recovery.

However, he said the slip over the past six months in businesses expecting to increase exports, from 36 per cent to 28 per cent, was 'somewhat disconcerting'.