Stephen Morse, partner and head of the Business Group at Michelmores, considers the Western Morning News and Michelmores Business Barometer survey findings

There have been some indicators that the UK is showing signs of recovery and may be pulling out of recession. Organisations such as the National Institute for Economic and Social Research and the British Chambers of Commerce have tentatively referred to signs of improvements in the manufacturing, retail and service sectors. Could quarter three see the turning of the tide?

The arguments about the end of recession are complex. Some say the economic decline has "bottomed out", but "bottoming out" is very different to recovery. Others say they the encouraging signs of quarter two are misleading and that we are in for a W-shaped recession with another decline on the horizon. The consensus, however, has been cautious - optimism tinged with warnings about the retardant effect of a harsh new tax regime and soaring public spending.

While the economists argue the toss, businesses here in the South West appear to have just got on with it. The 33rd Western Morning News Business Barometer, compiled by the Business Group at Michelmores solicitors, shows a remarkably positive outlook.

Half of the respondents expect business activity to remain static over the next quarter, leaving half expecting business activity to increase or decrease over that period. However, of those, three times as many think business levels will improve over the next quarter as thought that would be the case when the survey was last carried out in January 2009 - so sentiment does seem to be improving.

So far as the local economy is concerned, twice as many respondents believe that the trading outlook in Devon and Cornwall is better than throughout the UK as a whole than those who think the trading outlook in the UK as a whole is better than in Devon and Cornwall.

Factors that have adversely affected businesses in the South West have included a general falling off in business, an increase in bad debts, postponed capital projects and inability to secure funding. However, value brands, including low cost supermarkets, budget hotels, fast food outlets, self-grow and DIY are included among those sectors that are picking up new business, albeit in more competitive environments.

No commentary on the recession is complete without mentioning the banks. The Government and Bank of England have done much to ease the crisis and many are still saying that unless banks start lending more freely instead of rebuilding their balance sheets, the road to recovery will remain a very rocky one indeed.

Many of our respondents did mention the difficulty of securing finance as a major factor in limiting business activity, but some surprising and contradictory evidence was revealed.

Only a quarter of respondents had needed to ask their bank for more funds in the last 12 months, and of those nearly 74 per cent report their banks' responses as being positive or supportive.

Less than 8 per cent of respondents think Government and/or bank initiatives will herald recovery; if there are green shoots, respondents think they are more likely to be seen in house sales, rising employment and the return of consumer confidence.

While this remarkable survey shows that South West businesses are resilient, realistic and generally optimistic, there remains much cause for caution.

The main concerns are in relation to the level of public borrowing and private debt, ever increasing red tape strangling entrepreneurship and wealth creation, and skill shortages in the South West.

Overall, this survey has been positive.

Whereas hard economic data is historic, this survey reflects current beliefs and attitudes in the market place, with all responses having been given during September 2009. It remains to be seen whether this will lead to an increase in business confidence and whether it will result in a sustainable recovery.

For more information, please contact Louise Edwards, Head of Marketing, at louise.edwards@michelmores.com

( Last Updated: 18-03-2010 )

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