UK importers and exporters are concerned that spending cuts will threaten the fragile economic recovery, a city expert warns in a survey published today.
The Travelex Confidence Indexâs monthly outlook on international trade recorded a 5 point fall in confidence in June to 103, with the Expectations Index falling 12 points to 94.
The Index was carried out between 18th June and 1st July. During the period the Emergency Budget was announced on 22nd June.
âSpeculation over the âage of austerityâ has had a marked impact on importer and exporter confidence in June,â comments David Sear, Global Managing Director at Travelex Global Business Payments. âChancellor Osborneâs spending cuts and tax hikes dominated the headlines and the figures suggest it was an unsettling month for UK importers and exporters.â
The message that came through was that âbusinesses are clearly concerned that the UKâs fragile economic recovery will lose momentum over the next 12 months and fiscal tightening may push the UK back into recession,â says Sear. âAnd with the economic recovery so uncertain, I think the Bank of England will keep interest rates on hold until the beginning of 2011 at least.â
Travelexâs Confidence Index saw a sizeable shift in economic sentiment during June, as 27% of importers and exporters now feel that the UK economic recovery is not sustainable, compared to 18% in May. Sear expects to see a downward trend in economic confidence in the coming months, as major economies begin to withdraw stimulus.
Despite their concern for future economic conditions, importers and exporters view of current international trading conditions was upbeat, with 68% expressing confidence. Sir Andrew Cahn, CEO of UK Trade & Investment, comments, âIt is encouraging to see that exporters are generally upbeat, if understandably cautious, about current international trading conditions. Creating a more positive business environment, supporting growth and concentrating on developing a more balanced, low-carbon economy, which is less dependent on a narrow range of economic sectors, will be key to driving the economy out of recession.â