Confidence rises in both manufacturing and service sectors for first time in 18 months

Graham Ellis

Business confidence rose simultaneously across the manufacturing and services sectors for the first time in 18 months, according to January’s Business Trends report published by accountancy and business advisory firm BDO.

BDO’s Optimism Index, which claims to provide the most comprehensive snapshot of business sentiment by weighting macroeconomic data from the UK’s main business surveys, increased for a third consecutive month in January and now stands at 95.84, slightly above the 95 mark which indicates growth.

The Manufacturing Optimism Index edged up 0.05 points as a sustained spell of output decline was broken.

Manufacturing output signalled improvement for the first time in 15 months, rising 0.47 points.

Despite this small advancement, at 86.78 the Manufacturing Output Index remains languishing well below the point of contraction (95).

An increase in confidence was also witnessed by the services sector, which gained 0.13 points as businesses across the country enjoyed more certainty following Brexit.

Despite optimism cautiously improving across both sectors, it remains low by historical standards.

This is mirrored by BDO’s Output Index, which fell to its lowest level since July 2018, dropping 0.59 points to 95.8 as sluggish growth and residual political uncertainty weighed on output.

Most notably, the marginal improvement seen in manufacturing output was offset by a 0.73 decline in services sector output, which accounts for approximately 80% of the UK economy.

Elsewhere in this month’s Business Trends report, the Employment Index rose for a third consecutive month to stand at 112.46, up 0.21 points from December, as increased optimism has spurred a renewed appetite for hiring new staff.

Graham Ellis, assurance & advisory director and head of manufacturing at BDO in the North West, said: “The fact that we are seeing increasing optimism across both the services and manufacturing industry is a healthy sign.

“It remains to be seen whether businesses can shake off their Brexit blues, but if this month’s Employment Index is anything to go by, the initial signs are positive.”

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