Business Trends
Business Trends
Services sector drives bounce-back in UK output amid global uncertainty
- Services sector drives first rise in BDO’s Output Index in 2025
- Hiring intentions remain at decade-level lows as economic and political uncertainty persist
In a glimmer of hope for the UK economy, strong output in services drove the first increase in business output this year despite serious headwinds weighing on confidence and hiring.
The Output Index crept upward by 0.91 points to 97.75, as a recovery in the services sector offset a contraction in manufacturing activity.
Lower international demand for goods saw the Manufacturing Output Index fall to 88.39, its lowest reading since December 2022. This was driven by global uncertainty prior to the final announcement of the US tariff review on 2nd April, which has been confirmed to impact UK manufacturers, following the introduction of a 10% tariff.
Resilient domestic and international sales pushed services output up to 98.93 from 97.71 in February. The financial services sector was a notable contributor to the overall improvement. Better weather in March is likely to have partially offset a challenging month for consumer-facing sectors, such as retail, hospitality and leisure, as stretched household budgets weighed on demand conditions.
Business confidence and hiring intentions remain weak
Business confidence also rebounded slightly in March to 91.43, following a four-year low the previous month. However, the Optimism Index is still well below historic averages and lingering at levels last seen towards the end of 2022 – a period of high inflation and political uncertainty.
Continued political and economic uncertainty also kept hiring intentions subdued in March, after the Employment Index registered a 12-year low of 94.30 in February. The Index rose incrementally to 94.32 last month, but remained at historic lows last seen over a decade ago around 2013, when the labour market was recovering from the impact of the Global Financial Crisis.
Kaley Crossthwaite, Partner at BDO, said: “While last month’s Spring Statement provided welcome support for certain sectors, businesses across the economy are navigating turbulent headwinds in shifting trade conditions and rising costs.
“We know these businesses are the driving force behind the UK’s growth agenda. To invest, expand and continue playing their part, they need targeted policies that strengthen the UK’s position in international markets and ensure businesses can deliver on their ambitions.”
The chart below shows a sample of recent data from the Business Trends report. Any scores below 95 represent a contraction or a negative growth rate.
What is Business Trends?
The Business Trends report is one of the key monthly indicators of the performance of the UK economy, and provides an accurate and up-to-date picture of the environment that businesses are facing.
Business Trends covers more than 4,000 respondents from companies employing approximately five million employees across the UK. The report includes separate indices for services and manufacturing sector optimism and output, as well as indicators for UK inflation and employment.
Since 1992, the BDO Business Trends report has provided the most representative monthly measure of business output and optimism available. The results can be used as indicators of turning points in the economy as well as, because of their method of construction, leading indicators of the rates of inflation and growth.
See a sample Business Trends report
How is Business Trends prepared?
Indices are prepared on behalf of BDO LLP by the Centre for Economics and Business Research (CEBR), a leading independent economics consultancy.
Survey's contributing to Business Trends
Four indices covering output, optimism, inflation and employment, are calculated by taking a weighted average of the results of the UK's main business surveys, including:
- CBI Industrial Trends Survey
- CBI Monthly Trends Enquiry
- Bank of England Agents' summary of business conditions
- Markit/CIPS Manufacturing and Services PMI data
Taken together, these surveys cover more than 4,000 different respondents from companies employing approximately five million people in the UK. Collectively, they comprise the most representative measure of economic indicators and business confidence available. The respondents cover a range of different industries and business functions to deliver a comprehensive picture of the general economic outlook.