The global economic recovery, which has been slowing down in the past few months, has now gone into reverse, according to a worldwide survey of finance professionals by ACCA (the Association of Chartered Certified Accountants).
The results of ACCA's Global Economic Conditions Survey for the fourth quarter of 2010 show that twice the number of accountants as compared with the previous quarter (28% as opposed to 14%) believe that the recovery is slipping away.
Faith in the recovery is also at its lowest level in 18 months, with less than a third of respondents (32%) believing that conditions are improving - or are about to. In the previous quarter, nearly half (47%) were optimistic about economic prospects.
As a result, business confidence, as recorded by the survey of more than 600 professional accountants from around the world, has now gone into negative territory for the first time since the third quarter of 2009, with the share of respondents reporting no change in their confidence levels (37%, down from 42% in Q3, 2010) falling below that of respondents who had lost confidence in their organisations (38%, up from 28%).
"The issue for finance professionals for some time now has been the question of whether the economy, which had been showing signs of recovery, had taken a pause for breath or was about to take a downturn. The findings of this survey suggest that finance professionals think the downturn is now the more likely scenario," says Manos Schizas, ACCA senior policy adviser.
While the SME sector appears to be the most resilient, followed by the private, non-financial sector, there has been a significant drop in confidence in accountants working in large financial services companies, notes the report.
This may be as a response to developments such as the economic crises in some European countries. Finally, as had been feared, confidence levels among public sector accountants are lower than were seen during the depths of the downturn, and the loss of confidence in this sector continues to accelerate.
The survey has also shown that accountants see governments as being powerless to prevent a new downturn. As a result, assessments of government policy have decoupled from economic conditions and remained relatively positive. While 38% of respondents (up from 33%) rated their governments' responses to current economic conditions as 'poor' or 'very poor', a relatively stable 26% (down from 27%) rated them as 'good' or 'very good'.
The survey shows that late payment is on the increase, as is the number of insolvencies. The outlook for investment has also deteriorated, with businesses putting off decisions until the economic outlook becomes clearer. Only 8% of respondents reported a rise in investment of any kind (down from 14%), but the share of respondents reporting a scaling down of investment in staff and capital also fell marginally (from 38% to 37%).
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