Insolvency level an open question as poll shows mixed sentiment

A new poll of business leaders has shown a distinctly mixed set of views about the prospects for a new recession in the UK.

The survey by the Institute of Directors (IOD) found that most do not believe a recession is inevitable, or even close to it. Only 35 per cent said the risk of a downturn is high or very high, whereas the majority (53 per cent) judged it to be moderate and there were even some (11 per cent) who believed a recession is distinctly unlikely.

Moreover, the general view about any recession that does take place is that it is unlikely to be anything like as severe as that of 2008-09, which was, after all, the deepest since the Great Depression. 43 per cent predicted any contraction would be short and shallow, with 33 per cent tipping a long but mild downturn. Just ten per cent took the most pessimistic view that a long and deep recession is on the way.

And companies were generally upbeat about their own prospects, with 50 per cent expecting higher revenues than in 2011, compared to 27 per cent believing theirs will fall.

Of course, there will be some struggling companies that may need insolvency advice even if the most optimistic responses to the survey turn out to be correct.

But overall, IOD chief economist Graeme Leach backed the glass-half-full view expressed by many.

He remarked: “Despite all the doom and gloom in the media only one in three directors think there is a high or very high risk of a recession in 2012.”

But he did also note that the 53 per cent who said the recession risk is “moderate” are a “swing group” whose sentiment may get better or worse- with positive or negative consequences for the UK economy as a result.

And this in turn may depend on whether the eurozone situation improves or deteriorates, Mr Leach suggested.

So it would appear that the short-term fate of the economy – and therefore that of many companies – is on a knife-edge. And with organisations like the National Institute for Economic and Social Research predicting a recession this year (its recent study forecast that gross domestic product would fall by 0.1 per cent in 2012), there are still plenty who expect Britain to fall off on the wrong side.