Corporates Cautiously Optimistic About UK's Future Economic Prospects

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Senior executives believe there is reason for optimism about the future prospects for the UK economy, according to Investec Corporate & Institutional Treasury (‘Investec’), part of Investec Bank plc.

Karren Brady

While it was not the right time to raise interest rates, the MPC must also maintain a necessary caution over inflationary pressures. The Bank of England base rate will probably stay at 0.5% for another year or so. Philip Shaw - Investec

In a survey1 of attendees at a business seminar at Investec, three quarters (77%) were confident that the UK will not enter into a ‘double dip’ recession in the next 24 months, however, one in five believe there is still a risk of doing so.

Likewise, almost 95% of those executives surveyed were either ‘confident’ or ‘very confident’ about the future prospects for their own business over the next 6 to 12 months. The strategies for growth differ with around six in ten (62%) saying their business will grow organically over the next 12 months, while more than a third (35%) expect to grow through acquisition.

Speaking at the Investec event, Karren Brady, vice-chairman of West Ham United and former Managing Director of Birmingham City Football Club said, “This is a difficult period for many businesses and it is important they have the best team in place and the right internal processes to benefit from future growth. For us in a people business, the priority has always been establishing an environment where our staff can deliver the best possible results for suitable rewards.”

Around half those executives (51%) surveyed thought that the private sector will be able to grow sufficiently over the next 12 to 24 months to absorb the impact of public sector cuts. However, more than a third (36%) think the cuts will be too deep for the private sector to absorb.

Philip Shaw, Chief Economist, Investec agrees saying that there are signs that UK economy is recovering and that the “…muted recovery will continue for another year or so.” He said that “…while it was not the right time to raise interest rates, the MPC must also maintain a necessary caution over inflationary pressures. The Bank of England base rate will probably stay at 0.5% for another year or so.”

During his welcoming comments at the Investec event, David van der Walt, Joint CEO of Investec Bank plc, reinforced Philip Shaw’s views. He noted how Investec was seeing increased levels of activity across the Bank’s core client groups along with a general improvement in sentiment.

Over three quarters (76%) of the executives surveyed say that their business has prepared itself for the prospect of future interest rate rises. In response to the increase in volatility in global FX markets, a third said that they are using more FX option products to mitigate the impact of this risk. However, 41% of those surveyed still said that their business had never used FX option products before.

James Arnold, Investec Corporate & Institutional Treasury said, “Corporates are central to the UK’s continued and sustained economic recovery. Whilst it’s encouraging that the majority are confident of their and the UK’s wider economic prospects, it is surprising that so many are still failing to take basic steps to protect themselves against future interest rate rises and volatility in the FX markets.

“Companies need to adopt formal FX hedging strategies. Indeed, many of our clients are demanding more sophisticated methods to manage their FX risk. We offer a diverse range of tailored hedging solutions to companies that have previously only been offered the most basic FX products and services by their bank and non-banks.”

Investec Corporate & Institutional Treasury provide bespoke products and solutions which are typically reserved by other banks for their larger clients but are still appropriate for businesses of all sizes to take advantage of and understand. These are combined with the level of service and client relationship for which Investec is well renowned.

Investec Bank plc is a subsidiary of the Investec group which is an international specialist bank and asset manager http://www.investec.com

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Jonathan Wilks
Investec Bank plc
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