UK business confidence remains high

Accountancy network BDO International’s latest research points to continued confidence among UK companies.

Economic recovery is underway and news is continually emerging about improving business conditions for UK firms. According to the latest figures from accountancy firm BDO, this upswing is being translated into strong levels of business confidence.

There have been several indicators that optimism remains buoyant in the UK – the Sage Business Index recently reported it was at its highest level in four years.

But the most recent BDO Optimism Index, one of the four indices contained in its Business Trends report, gives confidence a score of 104.6 in October.

That may be slightly lower than the 105 recorded in the previous month, but is still comfortably higher than the long-term average of 100. It’s also far better than the 101.7 figure from the same month last year.

At the same time, output remained steady at 103.2 compared to 103.3 in the previous month. At the very least this means that the current business situation is holding firm, in spite of demand issues in a slack eurozone that could have pulled businesses back.

What’s more, firms are likely to be expecting an increase in workload, since hiring intentions remain positive – the employment index rose from 112.3 in September to 113.4 this month.

Considering that in October 2013, the figure stood at just 98.1, that indicates real improvement that has doubtless contributed to falling unemployment.

However, companies may struggle to support that growth if prices fall and the inflation index did point towards lower prices. A score of 96.2 represented a small fall from the previous month’s 96.6 – but as CityAM points out, that’s less likely to be about prices than positive supply side shocks.

Peter Hemington, partner at BDO, explained that there is work to be done to protect UK businesses from some of the risks in the eurozone and internationally.

“Action is needed now,” he said. “Interest rate rises certainly should be put on hold, housing market controls have now done their job and the government’s intentions to boost infrastructure spending are most welcome, if not enough.”