Business confidence hits 12 month high according to BDO survey
BUSINESS confidence is at its highest point since May 2012, pointing to improved business conditions for the rest of 2013, according to the latest Business Trends report by accountants and business advisers BDO LLP in Yorkshire.
BDO’s Optimism Index, which predicts business performance two quarters ahead, moved up for the fourth consecutive month, to 93.6 in May from 93.0 in April.
BDO’s Output Index, which predicts short-run turnover expectations, also improved in May to an 11-month high of 94.4. The Output Index for manufacturers showed particular improvement, moving up substantially from 90.8 to 93.7.
Improving confidence is feeding in to businesses’ hiring intentions, with the BDO Employment Index, which measures recruitment hopes for the next two quarters, rising to 96.6 in May, the index’s highest since August 2011.
This is the fifth consecutive month that the index has been at or above the crucial 95.0 level that represents employment growth, and indicates that the private sector will help to offset the effects of continuing public sector job cuts.
However, in spite of these improvements, dangers to the economic recovery remain. Inflationary expectations rose again in May, as the BDO Inflation Index climbed to 104.2 from a previous reading of 103.4.
This is the highest reading for the Index since January 2012 and points to rising costs for businesses, which could impact on their bottom lines.
In addition, although business confidence has improved, both the Optimism and Output indices remain below the 95.0 mark that indicates growth. This suggests that although business conditions are improving, risks still remain to the economic outlook.
Ian Beaumont, partner and head of BDO in Yorkshire, commented: “It’s encouraging to see that business confidence has continued its upward trend, and that businesses have retained their healthy hiring intentions for a fifth consecutive month.
“However the Government must do more to achieve the robust economic growth that remains tantalisingly out of reach. The Government must look to ensure more funds are reaching businesses through lending, in order to help them drive our economic recovery.”
