Business confidence falls to three-year low

By Anita Jaynes on 8 February, 2016

Business confidence has fallen to a three-year low, according to the latest Business Trends Report by accountants and business advisers BDO LLP.

BDO’s Business Optimism Index – which predicts growth six months ahead – has declined to 100.0, the tipping point below which firms expect their output growth to drop under the long term trend rate.

The findings come following a challenging start to the year for the global economy. Previously the UK has remained resilient to global economics fears, but headwinds from the American and Chinese economies and turmoil in the Middle East are finally starting to take their toll.

The impending referendum on the UK’s membership of the EU– expected as early as June – is fuelling further uncertainty for UK businesses looking at their long-term prospects.

The poor performance of the manufacturing sector continues to weigh down the UK economy in the short term. Manufacturing output contracted this month following decreasing global confidence, indicated by its sub-index dropping to 94.7: the 95 level separates growth and decline.

Commenting on the findings, Andrea Bishop Head of BDO LLP Bristol, said: “Global headwinds are finally hitting business confidence and the added uncertainty of an EU referendum just round the corner is fuelling concerns.

“So far the Government has done a good job in sheltering the UK economy from global storms but there is more that could be done. For instance, one small but helpful thing that the government could do would be to introduce a zero rate of VAT on companies that supply to exporters as currently happens in Ireland. This would boost UK manufacturing and encourage more trade abroad.”