Confidence among British businesses has plummeted to a record low in the wake of the escalating global economic crisis.
Nearly two thirds (60 per cent) of senior executives now view their company’s prospects as “very bad”, according to KPMG’s quarterly National Business Confidence Survey.
Only a third of respondents were as negative as that when the last survey took place in May.
This time, a further 47 per cent believe that the UK economy is already in recession, while 86 per cent say that the credit crunch has had a negative impact on their organisation.
The number of firms considering making job cuts in response to the dire economic climate has also increased over the summer, leaping from 53 per cent at the end of Q2 to 62 per cent at the end of Q3 2008.
Mel Egglenton, senior partner of KPMG in Birmingham, said: “The results of our latest Business Barometer are truly the bleakest we’ve ever seen – and no small wonder.
“The past month has been one of unprecedented turmoil in the financial markets, with each day bringing yet another extraordinary development that, even in isolation, would have seemed astonishing twelve months ago.
“This rapid pace of events has undoubtedly spooked British business, leaving many business leaders wondering, ‘what next?’.
“Back in May, only one business in ten thought that a full-blown recession was on the cards. Yet three months down the line, almost half of all businesses think that this recession is now upon us.
Couple this with the fact that the vast majority believe that the economic outlook will only get worse before it gets better, and it’s hard to see anything other than a gloomy winter ahead for the nation’s businesses.”
Ironically, despite the prospect of spiralling redundancies, more than half the companies questioned by KPMG said the plan to reward remaining staff with wage rises ranging from three per cent to ten percent.
“In June, the Chancellor called for restraint over wage demands amidst fears that above-inflation pay rises would exacerbate the problem of rising inflation,” Mr Egglenton said.
“However, the majority of businesses recognise that attracting and retaining the best talent is fundamental to keeping one step ahead of the competition – and none more so than during times of economic difficulty.
“Certainly there is an argument that businesses need the right firepower at hand for when things do start to pick up again – so while management may very well be seeking to make cuts in those areas where there are perceived inefficiencies, they are also intent on rewarding those who help their business weather the storm.”
The gloomy prospects for businesses were reinforced at the weekend by an Ernst & Young survey that showed profit warnings have risen by nearly a third since this time last year.
Six quoted West Midland companies issued warnings in the third quarter of this year, one more than in the previous three months and three more than in the same period last year.
Nationally there were 111 warnings in the three months to September 30, the highest number since Q3 2001.
The West Midland warnings came from companies in the household goods and home construction sector, food and drink retailers, general retailers, industrial metals and mining concerns and the general construction industry.
“UK profit warnings continued to come thick and fast during the third quarter and it is deeply concerning to think that the worst may still be yet to come,” said Ian Best, a corporate restructuring partner at Ernst & Young’s Birmingham office.
“The end of the third quarter and the start of the fourth brought some of the most turbulent weeks for banks and financial markets in a generation – weeks that completely redefined the banking landscape and reminded us that the credit crisis is far from over.”