06 August 2013

UK economy shows signs of stability

The UK economy is stabilising with fewer companies going out of business, new figures suggest.

Statistics from the Insolvency Service show 622 businesses went into administration in the second quarter of this year. This is slightly fewer than during the same period of 2012 when 625 companies went into administration. It is also the lowest figure for the second quarter for four years.

The figures show the strongest recovery is taking place in the construction industry. The number of firms in this sector entering administration fell by 43% from 89 in the second quarter of 2012 to 51 in the second quarter this year.

There was also a 9% fall in companies entering administration in the retail sector.

Indicators of the overall health of the economy

Mark Firmin, KPMG’s UK Regions Head of Restructuring, says the state of the construction sector is a good indicator of the overall health of the economy.

He says: “This represents the fourth consecutive quarter of recovery in construction.”

This news comes as research shows optimism is growing among small and medium-sized manufacturers for the first time since April 2012.

Growing confidence

The CBI’s SME Trends Survey for the three months to July claims confidence is increasing despite manufacturing activity remaining weak.

Anna Leach, CBI Head of Economic Analysis, says: “Despite another disappointing quarter for small and medium-sized manufacturers, with output continuing to fall, optimism about the general business situation has risen for the first time since spring last year.

“Firms expect demand to improve both at home and abroad and production to stabilise over the next three months.”

Increased stability and business growth could see more companies able to expand and move to new business facilities.  It may also encourage more entrepreneurs to create start-ups. As the economy becomes more stable, it should also become easier for businesses to access funding.