UK businesses ‘stagnate’ as general election doubts weigh

HUGE swathes of British industry have gone into stagnation ahead of the election a major corporate recovery firm warned today.

In its quarterly red-flag alert Begbies Traynor said that companies in its top “critical” category had risen by 4% in the past three months — the first rise since the second quarter of 2014. It warned of “stagnation across all areas of the economy”.

That is in contrast with the EY Item Club’s report released today which said the UK economy was taking the general election “in its stride”.

Begbies Traynor partner Julie Palmer said: “Concerns over the outcome of the most uncertain election in a generation have led to a state of stagnation across all sectors of the economy, as swathes of UK businesses have guarded against the worst-case scenario by postponing their growth plans until after the results have been announced.”

London was the only area to show any improvement in distress levels during the quarter with a 4% fall in those businesses with “significant” distress against a 1% fall nationwide.

Ric Traynor, chairman of Begbies Traynor, warned: “With little separating the two main parties in the polls, the likelihood of an inconclusive result on May 7 is higher than ever. If so, this could result in the formation of a new coalition, the drafting of an emergency Budget and potentially an additional month of uncertainty, therefore restricting new investment until June or beyond and putting the economy and UK businesses at risk of slower growth.”

But the Item Club predicted that the UK economy would grow by 2.8% this year. Its chief economist Peter Spencer said: “The economy is taking the general election in its stride as ‘noflation’ trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016. This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums.”

A poll for temporary management firm Interim Partners found 62% of senior executives believe elec tion uncertainty is damaging the private sector. Doug Baird, chief executive of the firm, said: “With just over two weeks to go before the election, significant concerns are emerging among many at senior level over the impact on business — both now and post-polling day. This is more than just about the policies of prospective winners — the real concern is that the uncertainty in the run up is not going to disappear afterwards.”

The same poll also found 92% of the 700 managers questioned believed a Conservative victory would be the best outcome for the private sector.