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Surge in business confidence means UK recession 'at an end'

Guardian Economics 24th August 2009

The news fuelled gains on the London stockmarket this morning, coupled with euphoria after England captured the Ashes

A record surge in confidence among business professionals indicates Britain's recession is at an end, according to research.

Optimism among professionals in the third quarter hit its highest level since the start of the financial crisis two years ago, the Institute of Chartered Accountants in England and Wales (ICAEW) said.

The confidence measure jumped to 4.8 at the end of June from -28.2 in March - the biggest improvement since the survey began in 2003. The institute predicts that the economy will grow by 0.5% this quarter, breaking five quarters of falling output.

ICAEW chief executive Michael Izza said the findings suggest that "the UK recession is at an end".

He added: "While there is no doubt that the UK economy is on its way to recovery, we shouldn't underestimate the challenges ahead for businesses."

Coupled with euphoria after England captured the Ashes last night, the news fuelled gains on the London stockmarket this morning. The FTSE 100 rose 41.81 points to 4891.70 in early trading, a rise of 0.84%, following Friday's near-100 point gain when the index pushed through 4800 for the first time since last October.

Asian shares advanced strongly today on fresh optimism over the global recovery, following upbeat comments from US Federal Reserve chairman Ben Bernanke and news that Thailand has come out of recession.

"We seem to be on our way to the moon today on Ben Bernanke's coat tails," said David Buik at BGC Partners.

The ICAEW survey showed that UK businesses expected a rise in all but one of 14 key financial performance indicators in the coming year, in contrast to earlier in the year when most were expected to contract.

The research found 41% of senior business professionals were more confident about the economic prospects facing their business in the next year. But only 6% were much more confident, indicating a continued level of caution over the timing and speed of the recovery.

IT was the most optimistic sector, followed by banking, finance and insurance firms. The survey found "a remarkable upturn" in confidence in the banking sector. Signs of stabilisation in the housing market also helped boost optimism for property firms.

Health and education professionals were the least confident amid growing fears of cuts in the public sector.

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