Two new forecasts offer opposing prospects for umbrella companies in the coming year.

PAYE umbrella contractors hunting for new placements may be heartened by the latest forecast from the CBI. It predicts that, while growth will remain sluggish throughout 2011, GDP will rise modestly in 2012. However, a study by the insurance firm Aviva suggests that 10% of small firms fear having to close unless trading conditions improve.

The figures come at a time when consumer spending appears to be faltering and most measures of business confidence indicate a decline. Even so, the CBI anticipates a 1.3% expansion in the UK economy this year and a 2.2% expansion in 2012.

Investment growth is expected to limp along at around 3.7% this year but the CBI believes it will rise to 9.7% in 2012. The CBI’s Director-General, John Cridland, believes that we may see a somewhat lacklustre recovery but the UK will nonetheless “remain on track.” His views were endorsed by the CBI’s Chief Economic Adviser, Ian McCafferty, who expects economic conditions to remain tough during 2011 but, as salaries improve and inflation eases, prospects will brighten in 2012.

The Aviva study is rather less optimistic, at least so far as the 500 small businesses it surveyed are concerned. 28% of respondents believed that another recession was likely, while only 13% remained positive about the economy. Aviva’s Commercial Product manager, David Bruce, explained that many SMEs “feel they are in real danger of losing their businesses should the economy fail to improve this year.” He noted new revelations that banks involved in the Government’s much-touted ‘Project Merlin’ have missed important lending targets for SMEs.

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