Since the beginning of the recession several years back, business optimism has been steadily on the decline other than for very brief periods of time. However, since it appears as though the eurozone may be on the verge of stabilising, business optimism is on the rise once again but that is not preventing companies from stashing cash as a safety net. Optimism may be on the rise, but businesses are erring on the side of caution this time around.
The latest surveys show that Britons are not expecting a double dip recession as they had feared within the past 6 to 12 months. Also, fewer people even fear a second quarter of contraction in the economy even though the OECD indicated that the economy shrank by 0.1 percent in the first three months of this year after a .03 percent drop in the final quarter of last year. There is some amount of optimism that the second quarter of this year will bode well for businesses and the economy in general.
It was actually concern that the single currency euro was about the break up that fuelled fears of a double dip recession in the UK. This sense of optimism is spilling over into the availability of credit and for the first time since December there is hope that banks will once again, albeit slowly, begin lending to businesses in order to foster growth.
Despite the fact that a new credit crunch will probably be avoided and banks will most likely loosen up on lending, many businesses are still reluctant to part with hoards of cash and are being a bit overly cautious. On a closing note, one thing that analysts are noticing is that there was an increase in employment within the last quarter which adds a bit more optimism into the mix. If the second quarter shows similar improvement, analysts believe the fear of another recession can finally recede into the background once and for all.
