South: BDO report shows business confidence 'plummeting'

UK business output growth has declined for the first time this year, a new report from accountants and business advisers BDO LLP has found. BDO’s Output Index, which measures UK business output growth, fell to 98.63 in April from 98.74 in March.

Business confidence also registered another decline in April, slipping by 0.36 points to 95.74 – the lowest level the index has been since 2012.

As the imminent threat of a no-deal Brexit was lifted last month, activity in the manufacturing sector is expected to diminish due to unprecedented levels of stockpiling tailing off. BDO’s Manufacturing Output Index, which tracks output growth in the sector, declined to 97.27 in April. This marks a year-on-year decrease of 8.32 points and compares to its most recent high of 103.26 in September 2018.

In further gloomy news for the manufacturing industry, confidence has hit a 30-month low. BDO’s Manufacturing Optimism Index, which shows how businesses expect output to develop in the next three to six months, declined to 101.09 in April from 103.73 in March. The index has not been this low since November 2016 and reflects concerns by manufacturers that they expect growth to moderate in the coming months.

Optimism in the UK’s services sector fell for a ninth consecutive month after it plummeted by 4.15 points in March. The index shows that optimism dropped to 95.06, just 0.06 points off negative territory. Despite the extension of Article 50 until October, businesses still don’t have the clarity they desperately need on the future long-term relationship the UK will have with the EU.

Commenting on the BDO Business Trends Report’s findings, Malcolm Thixton, lead partner at BDO in Southampton, said: “The only certainty businesses have at the moment is that the UK government still doesn’t know exactly how or when the UK will leave the European Union. We are seeing the impact of this confusion with business confidence plummeting.

 “An extension of Article 50 alone is insufficient to restore sentiment among businesses, so it was disappointing to hear the chancellor’s plan to conduct a three-year spending review is now unlikely to go ahead given the political uncertainty. The chancellor should not wait - a rethink of government spending priorities could provide the shot in the arm that the economy needs.”