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News Two

Firms predict good times ahead

Company owners predict UK economic growth will accelerate in the second half of 2006, new research shows.

The latest business confidence index from accountants BDO Stoy Hayward reached 101.8 in April, the highest in a year.

As a result, the report predicted economic growth will reach 3.4% in the third quarter of this year, compared to just 2.4% during the same period in 2005.

Businesses also forecast inflation will come in at 2.2% over the next six months, above the Treasury's 2% target.

Based on the findings, BDO predicted that the Bank of England Monetary Policy Committee will not raise interest rates from the current 4.5% this year.

Peter Hemington, partner at BDO Stoy Hayward, said: "Short-term confidence has risen to its highest level in over two years and it is good to see that medium-term confidence has stabilised at its highest point since last April.

"Businesses are responding by planning for better times ahead – stocks are being built up and capital expenditure looks set to rise in the coming months."

Douglas McWilliams, chief executive of the centre for economics and business research, added: "The Bank of England will be relieved to see the inflation index remaining at a level compatible with its target.

"But, with inflation showing no signs of falling significantly below two per cent, and oil prices still threatening, there is no suggestion yet that the MPC should consider interest rate cuts."