The UK economy is set to rebound next year as businesses remain upbeat in the face of sky-high oil prices and worries over growth in the United States, the latest BDO Stoy Hayward survey has shown.
The medicine of a quarterpoint cut in interest rates in August appears to have worked on business confidence which is rising for the first time since the beginning of this year, the accountancy firm said.
This is despite the disruption to trade between the US and the UK caused by three major storms.
Manufacturers have been hardest hit with orders from US clients significantly interrupted since BDO published its previous Business Trends Report in July.
BDO said its optimism index - an indicator of GDP growth two quarters ahead - rose to 101.2 this month from 100.4 in July.
This implies that economic growth will recover to just over three per cent in the second quarter of 2006, the report said. But the signals on economic recovery given by BDO's optimism index were not mirrored by its barometer on output, which predicts GDP movements a quarter ahead.
"While there is not yet any sign of a UK recession, equally there is also no sign of a return to the trend growth of around three per cent that would enable the Chancellor to achieve a significant reduction in public borrowing," the report stated.