UK importers and exporters’ confidence in the economy leaped in July, as positive economic data fuelled hopes for a return to strong economic growth. The Travelex Confidence Index (TCI) jumped 12 points in July to 116, from 104 in June. Analysts said the strong gains were driven by 2Q10’s GDP figure, as it showed the UK grew at its fastest pace in four years.
Sentiment was also bolstered by Prime Minister David Cameron’s overseas trade mission, as nearly half of those interviewed (44%) expressed increased confidence in the Conservative-Liberal Democrat coalition’s trade policies, compared to 35% in March.
Paddy Earnshaw, director of customer relations at Travelex Global Business Payments, said: “July’s sharper-than-expected increase in confidence will help improve importer and exporter morale and allay concerns about the medium to longer term growth outlook. It is particularly encouraging to see the new government’s international trade efforts injecting confidence into the UK’s SME [small and medium enterprises] importers and exporters.”
Despite their renewed confidence in the UK economy, Earnshaw believes it is too early to say whether their optimism has been accurately placed, as many uncertainties remain for British importers and exporters. “Even as the UK recovery broadens, June’s dip in confidence suggested businesses are fearful of austerity measures and the impact they will have on consumer buying power. I would expect confidence to remain volatile, as harsher fiscal tightening approaches,” he said.
The deteriorating picture in the US may also crimp confidence in the upcoming months, as 84% of respondents are now feeling the threat to business development comes from the current health of the global economy. The figures underpin growing concerns in the financial markets that the US recovery has slowed and may lead to a double dip recession.
Despite the concerns over US recovery, expectations for the UK economy, international trading conditions and business development were all on the up, according to Travelex Global Business Payments. Its Expectations Index rose by nine points in July to 103.