Fiscal Tightening Will Work, Say UK Importers and Exporters
Over three quarters (76%) of the UK’s small and medium-sized enterprise (SME) importers and exporters believe that fiscal tightening will successfully reduce the UK’s budget deficit, according to the Travelex Confidence Index (TCI) report. They believe that the Conservative and Liberal Democrat coalition’s aggressive programme of spending cuts and tax hikes will work. Travelex said that their ringing endorsement of the Chancellor’s plans echoes that of rating agency Standard & Poor’s, who recently upgraded the UK’s economic outlook.
“Most of our business customers seem to be accepting that government spending cuts are a ‘necessary evil’. While they might hurt business in the short term, they are confident that the fiscal squeeze will reduce the deficit over the long term, which is encouraging,” said David Sear, global managing director at Travelex Global Business Payments.
Most importers and exporters adopted a ‘wait and see’ approach in October, as the overall Confidence Index remained stable at 104. The index is now seven points lower than it was in August. Overall, faith in the current economic situation has worsened, with confidence in the current economic environment falling 6% to 50%. Despite this, confidence in future international trading conditions edged up 2% to 62%.
“Overall, the latest index shows that UK importers and exporters seem to feel better about their longer term prospects than they do about their current situation. However, a recent string of positive UK data, such as stronger than expected third quarter growth and upbeat manufacturing activity, suggests sentiment among local importers and exporters may head higher over the near term,” said Sear.