FALTERING CONFIDENCE FAVOURS FREEZE IN INTEREST RATES

During the eleventh hour deliberations of the Monetary Policy Committee this week, the majority of managers would favour holding rates at 4 per cent for the eleventh month in succession.

According to the latest Quarterly Management Trends published today by the Chartered Management Institute1, a clear majority of managers (64 per cent) want interest rates to stay the same. However, in the face of continuing global economic uncertainty and the prospect of war, the "doves" are beginning to gather force. Now nearly one in five managers would prefer a cut in the rates compared to only one in 15 back in June.

Over the past quarter, the Business Confidence Indicator has virtually stayed the same reflecting the faltering confidence, having fallen only marginally from 40 per cent to 39 per cent.

The survey shows a slight decrease in both demand and output over the past quarter, but rising performance expectations for the next quarter.

However, managers are maintaining a wary, if not short-termist, attitude to their organisations' future investment plans. There has been a marked decrease in planned investment across all areas of expenditure from plant and machinery, information and communications technology, research and development, to employee training and marketing.

The latest figures from the Office of National Statistics have also shown that business investment has dropped to its lowest level in five years. As a proportion of national income, business investment is back to the levels of about 10 per cent last seen in 1993-94, in the wake of the early 1990s recession.

Christine Hayhurst, Director, Public and Professional Affairs of the Chartered Management Institute said: "The survey reflects how managers have become more nervous against the current external economic backdrop and their risk-taking appetite appears to have diminished. This has the potential to exacerbate a downside effect."

"If businesses are to achieve their future performance targets, they may need to reconsider their investment decisions. Cutting back now on vital areas of investment such as employee training, and research and development may jeopardise their longer-term strategic advantage in the face of international competition."

For more information please contact:
Alison Agmen-Smith
Tel. 020 7497 0496

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