UK business confidence at weakest for years

Business optimist in the UK has fallen to its lowest level in five and a half years, with the biggest drop in confidence in over a decade.

The BDO optimism index, which shows how business expect output to develop in the next three to six months, fell to 96.10 in March from 99.76 in February. This is the lowest since September 2012 and the worst monthly drop since the 2008 depths of the financial crisis.

The BDO index also revealed that business sentiment is currently weaker than the post-referendum low in 2016.

“The services sector, which comprises around 80% of UK GDP, drove the overall decline in confidence with the sector index falling by a dramatic 4.15 points to 95.13 in March”, the report said.

Despite the plunge in optimism, BDO’s output index, which measures UK business output growth, held steady at 98.74 in March, up 0.42 from 98.32 in February.

Even so, the output growth remains below the average growth trend of 100 and is inflated due to the excessive stockpiling on the island due to Brexit.

Peter Hemington, partner at BDO LLP, said: “Continued uncertainty about Brexit has led to a severe worsening of expectations about our near economic future. What we’re now seeing is a sudden realisation that a no deal Brexit is both a real and imminent possibility.

“This matters, because worried businesses don’t hire or invest, creating the conditions for a marked downturn.

“Looking on the bright side, most businesses are not unhappy with current trading. If the fear of no deal can be lifted, we should hope for a quick return of confidence, and perhaps even a “no-deal averted” bounce in the economy. Let’s hope our politicians can deliver this.”