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Business optimism rises but investment continues to lag

Simon Quicke

Business owners are feeling more optimistic about the prospects for profits and growth this year, although the shadow of a double dip recession is still hovering.

Around a third of business leaders think there is a high risk of recession this year but a similar number expect it to be a mild one, according to the latest outlook from the Institute of Directors (IoD).

Half of those quizzed by the IoD expect their own company fortunes to be better this year with higher revenues and 40% expect profits will rise.

The problem for those in government hoping for a private sector led recovery is that although optimism is rising there continues to be a relutance by firms to invest or employ extra staff.

"The resounding message from the survey is the critical role of confidence at this stage in the economic cycle. If the euro-crisis stabilises, confidence could return relatively quickly and companies could dust down business investment and recruitment plans put on hold last year," said Graeme Leach, Chief Economist at the IoD.

"Alternatively, if the euro-crisis gets worse, confidence is highly unlikely to return this year," he added.

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