Confidence at record low says BDO

AN “optimism index” collated by the accountancy firm BDO has fallen to its lowest reading since it began 21 years ago.

But despite the low levels of confidence, other data in BDO’s monthly Business Trends report suggests firms are intending to take on more staff.

The optimism index, which predicts business performance two quarters ahead, fell to 88.9 in January from 90.3 in December – the eighth consecutive month that the index has remained below 95, which indicates growth.

BDO says this suggests the economy will struggle to grow in the first quarter 2013 which, following negative growth in the final quarter of 2012, points to a triple-dip recession.

BDO’s output index, which predicts short-run turnover expectations, also supports this, falling from 93.1 to 92.3 last month, further away from the 95, indicating growth.

In contrast the employment index, which measures businesses’ hiring intentions over the next two quarters, rose to 95.1 in January from 93.0 in December.

It is the first time the index has stood above 95 since April 2012 and supports a dip in the official unemployment figures. According to the the latest labour market figures from the Office for National Statistics, unemployment fall back to 7.7% in the three months to November, down from 7.9% in the previous quarter.

Jeff Jones, partner and head of BDO LLP in Manchester, said: “In spite of a strengthening labour market, business confidence continues to weaken, and improved hiring intentions are not translating into growth plans. It seems the damaging effects on businesses of five years’ zigzagging economic growth has left them wary of making concrete plans for expansion and resigned to the ‘new normal’ of economic stagnation.

“To end this cycle, it is imperative that the Government implements plans to expedite growth. Without growth incentives, we will continue to see businesses reluctant to invest and expand, which poses a grave threat to our economic recovery.”