WILL 2013 be lucky for the UK in getting the economy back on track, or are we destined to carry on bumping along the bottom for the foreseeable future? Deputy business editor Lauren Pyrah asks two experts their views on the UK’s financial outlook for the New Year.

TALK the UK could go into a “triple dip” recession at the end of the first financial quarter of 2013 has been on the lips of financial analysts across the country since December's Markit/CIPS purchasing managers' index (PMI) survey for the services sector, which makes up 75 per cent of the UK economy, showed a reading of 48.9 –its first decline in two years.

This, combined with mixed reporting from chain stores and supermarkets on Christmas trading, and first high street casualty of 2013 – camera equipment firm Jessops – collapsing into administration less than a fortnight into the New Year, has led to speculation the UK is not out of the woods yet.

The atmosphere has certainly got analysts jumpy, with many predicting the final quarter of 2012 to show the economy as a whole has shrunk by as much as 0.4 per cent, and some even going as far to also predict the first quarter of 2013 will also see a consecutive decline, putting the country into recession for the third time in four years.

But conflicting research has shown signs of increased business confidence, with the Markit/CIPS purchasing managers' index (PMI) for manufacturing showing a much more positive reading of 51.4 in December, marking a return to growth for this sector the first time since March, and the highest reading since September 2011. Although the sector represents a much smaller proportion of the UK’s total economy at ten per cent, it is a key area as many manufacturing businesses are linked to exports, bringing wealth from emerging economies into the UK, and causing some analysts to say the bump could lift the figures from the final quarter of 2012 into the black.

The sector is also vital to the North-East, with firms including Hitachi, Nissan and Cleveland Bridge among those embarking on major projects that will bring jobs and investment to the region.

So is the economy flat-lining, or will 2013 herald the start of economic recovery?

Andy Haslam, partner for Begbies Traynor in Newcastle, described economic conditions as “stagnant”, and said he does not expect to see a great deal of growth this year, advising businesses to accept these conditions as “the new normal”.

DESPITE some optimism early last year, the last 12 months have failed to produce the widespread and marked recovery we have all been waiting for. Rather, the UK has continued to bump along the bottom and news that the service sector, which makes up three quarters of the economy, fell below the 50 mark for the first time in two years in December is another blow, increasing the likelihood of a slide back into recession.

While the GDP figures for the third quarter of 2012 showing growth of 1 per cent were warmly welcomed, they should have been viewed with some caution when put into context.

There’s no doubt that the economy was boosted by the one-off phenomenon of the Olympic Games and buoyed up by the service sector which bucked the trend and grew by 1.3 per cent from July to September compared with a fall of 0.1 per cent in the previous quarter.

However, following the previous nine months of recession, whether or not this indicates the start of a sustained recovery is doubtful. In fact, the level of output in quarter three 2012 was almost exactly the same as it had been in the same quarter of 2011.

Having only seen minimal growth, the question of whether the UK will officially return to recession seems to some extent to be nothing more than a technicality. Although if we do once again undergo two successive quarters of negative growth, the impact on businesses in terms of falling confidence could have far wider repercussions. The current feeling in the market place is that the economy and businesses are stagnating. With even greater uncertainty caused by a return to recession, directors are likely to continue to batten down the hatches and delay making decisions about investing in future growth.

Despite, the banks reporting that they have money to lend, businesses seem unwilling either to take out additional borrowings or to reinvest profits in development and expansion. One of the most detrimental consequences of the downturn has been that fear has stifled creativity and growth. Personally, I don’t expect to see much change for local businesses in the year ahead, whether or not the dreaded triple dip recession materialises. Many are still hampered by a lack of cash, waiting for bills to be paid by struggling customers which may or may not be settled.

While the economic situation is unlikely to worsen significantly, neither can businesses rely on a dramatic improvement. Going forward, businesses need to be as lean and efficient as possible and ready to adapt to the changing environment, its threats and opportunities. It’s not all doom and gloom, there are some positive signs such as predictions of an improvement in the housing market in 2013 and we are also fortunate that unemployment has remained at a low level. Whether or not the UK is heading for a triple dip, my advice to businesses is to accept current conditions as the ‘new normal’ - directors need to face financial pressures such as cash flow issues head on and plan accordingly.

But James Ramsbotham, chief executive of North East Chamber of Commerce, thinks with investment and hard work, 2013 could be the year the UK economy finally sees the green shoots of recovery.

AT the end of January the latest GDP figures will be reported. I suspect that no matter what the results, there will be no cacophony of champagne corks heard across the North East or any shaking heads falling into despairing hands.

That is because we don’t need the Office of National Statistics rubber stamp to know that people are working hard and delivering growth in their businesses against a backdrop of pretty challenging trading conditions. We know that employment is heading in the right direction and, thankfully, so is unemployment.

Indicators from our own Quarterly Economic Surveys throughout 2012, show that firms are recruiting more workers and investing more in their businesses than at any time since the recession began in 2008. Business optimism also reached a four-year peak.

Manufacturing growth slowed slightly towards the end of last year, but is still growing faster than at any time since 2008 and our service sector, knocked from pillar to post during the recession, is now seeing significant positive growth.

Our surveys and experience provide a realistic picture of the regional economic landscape: broadly speaking, businesses are growing but not yet fast enough to make it feel like a robust recovery or to overcome what’s happening in the public sector. These are all positive indicators that 2012 was the year confidence returned to the private sector.

What we are seeing regionally is being reflected nationally. The British Chambers of Commerce announced this week that economic conditions were more favourable in the final three months of 2012 than in the previous three months, and expects to see modest growth over the next two years.

Business is resilient and in the North East we have always proved our resilience in the face of adversity.

It is true that domestic balances remain well below their pre-recession levels, but the increase in confidence in both the service and manufacturing sectors reinforces the view that the economy will record modest growth in the fourth quarter of 2012.

Fears that the economy returned to negative growth in the fourth quarter are not supported by either the regional or national quarterly surveys.

The quarterly GDP estimates over the past couple of years have also been somewhat erratic. Rather than the big highs and terrible lows suggested by the GDP figures quarter by quarter last year, what we have actually seen is signs of modest but sustained growth.

The economy is making progress – it is slow and the improvements are slight, but it’s progress nonetheless. This highlights the determination and ability of the businesses we have here in the region.

Nissan continues to grow and attract new models, all the while breaking productivity records. Hitachi is on the horizon and will add a substantial economic boost to the south of the region. Nifco announcing it is to recruit a further 150 workers. Smaller firms like Middlesbrough’s Pyemetric Refractories are growing exponentially and exporting all over the world. Games developers Double Eleven are pioneers in their field, securing contracts with global giants like Sony.

These are just a handful of our success stories here in the region, there are thousands more.

Nurturing these firms and in turn stimulating growth must remain the top priority of the Government. Without growth nothing else is possible.

There can be no doubt that the UK economy will continue to face major obstacles throughout 2013, but business is doing its bit. We are picking up the slack caused by the cuts to the public sector.

We have shown the Government that we can deliver; now it’s time for them to match our efforts.

There are no Olympics to help us out in 2013, but make no bones about it, an Olympic effort is required if we are to rebuild the economy and make sure the momentum that began in 2012 is carried into this year.