Confidence Is out there   but are the Foundations Strong

12 April 2010

The signs are positive. Business confidence is high; appetite for financial risk is increasing and stocks are starting to outperform safe assets such as cash and gold. But with political uncertainty still looming and still an amazing lack of clarity with regard plans to 'bail out' UK plc', there is a great risk that this confidence will ebb away.

The signs are positive. Business confidence is at a 4 year high according to a Business Trends Survey which shows that confidence and stock levels are back to pre-recession levels. The US stock market is back up to levels seen just before the collapse of Lehman brothers.and the UK financial markets are starting to see riskier portfolios outperforming safer assets. A note of caution though. Yes there has been a rise in output but a lot of this can be attributed to 'restocking' (companies building up the inventories that they let decline during the recession). There is also the impact of the fiscal stimulus provided by many governments - the effects of this will start to tail off. Can the V shaped recovery maintain momentum? Possibly. The borrowed money has to be repaid at some time and it is on this point that the danger lies. There is still a real lack of clarity from any of the main parties detailing just how they plan to pull the UK economy out of the deficit hole she is in. This uncertainty will undermine the rocky foundations of recovery.


UK Government  Finance 

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