Business confidence at its lowest since recession claims survey
BUSINESS confidence is at its lowest since the end of the recession with both manufacturing and the service sector gloomy about prospects.
In its latest Business Trends, BDO said for the first time since July 2009, both the manufacturing and service sectors were showing optimism levels below a crucial benchmark figure.
The Optimism Index – which predicts business confidence two quarters ahead – shows both sectors below the 95.0 threshold which indicates growth. BDO said the survey showed neither sector could be relied upon to lead the economy’s recovery.
In particular, it said confidence levels in the manufacturing sector were low. The sector’s optimism score has fallen from 116.4 to 88.2 – a huge 28.2 points – in just seven months.
Overall, the BDO Optimism Index has fallen to 93.4, pointing to negative growth in Q1 2012. This is the first time the index has dipped below 95.0 since January 2011.
Businesses’ pessimism is also compounded by the BDO Output Index, which measures businesses’ short-run turnover expectations. This fell to 93.3 in September, again its lowest level since the summer of 2009.
The advisor said there was little sign of a reversal of this trend, as hiring intentions in the manufacturing and services sectors indicated further headcount reductions ahead. The overall growth prospects for the labour market are equally bleak – the BDO Employment Index fell for the fourth consecutive month in September, and official data for the three months to July show the largest quarterly rise in unemployment since August 2009.
Mark Anslow, partner and head of BDO in Birmingham, said: “Businesses’ hiring intentions point to more job losses ahead which, coupled with tumbling optimism and output, indicates tough times in early 2012. Given that the latest ONS growth figures have been revised downwards, this concern is even more acute.
“To reinvigorate the UK economy we urge the government to invest in business by implementing supply side reforms – particularly reform of the tax system – and to introduce measures that encourage private sector investment in infrastructure.”
He said BDO had been calling for expansion from the Bank of England for some time and the £75m increase in QE was welcome.
“Given the data we’re seeing, this will provide a much needed and timely boost. In addition, we welcome the Chancellor’s proposed credit-easing scheme; however given that any effects are not likely to be felt until 2013, the more immediate measures to salvage the ailing economy are imperative,” he added.
The BDO Monthly Business Trends Indices are prepared on behalf of BDO by the Centre for Economics and Business Research, a leading independent economics consultancy.
