BDO predicts increased economic traction

THE economic revival will continue to gather pace in the first half of 2014,  according to a survey from business advisers BDO.

The firm’s Business Trends report says corporate optimism rose to its highest point in 43 months in Nomember, with a positive attitude being seen in both the service sector and more noticeably in manufacturing.

BDO’s Optimism Index, which predicts business performance two quarters ahead, increased from 101.7 in October to a 43-month high of 103.1 in November, taking it above the 100.0 mark that indicates the economy’s long-run average growth rate.

Optimism in the services sector, which accounts for just over three-quarters of the economy, rose to 100.4 in November, up from 99.9 the previous month.

Optimism among manufacturers, driven by rapid growth in new business orders saysd BDO, rose from 109.6 in October to 115.3 this month – the sub-index’s second highest reading in Business Trends’ 21-year history.

Business conditions also continued to improve in November, and provide further evidence that the economy’s recovery is broad-based. BDO’s Output Index, which predicts short-run turnover expectations, went up from 100.7 to 101.8 in November, with both the manufacturing and services sub-indices increasing strongly this month. The strengthening Output Index points to a strong end to 2013 for the economy.

Inflationary pressures look to be receding too, the firm believes. Its Inflation Index was down from 100.5 in October to 99.7 this month – below the important 100.0 mark that indicates inflation’s long-term trend.

Tim Entwistle, partner and head of BDO in the North West, hailed a “strong and broad-based recovery”.

“I think we can finally say that the key economic battleground has shifted from austerity to the new debate about how the government can help businesses achieve sustained growth in the context of a dynamic, internationally competitive economy.”  

Mr Entwistle said he remains concerned over both education and skills provision and also by the “dysfunctional” planning regime.

“Just as importantly, there still remains a very strong case that we need to spend more on infrastructure, particularly on updating our tired, expensive and increasingly life expired energy industry.  If the government can at least partly crack these issues, the economy has a chance of getting back to good levels of sustained long-term growth.”