UK business output falls to lowest level since 2005
- Business output index in 2020 fell to 15-year record low
- Output flatlined in December despite the end of national restrictions
- UK labour market continues to falter after a second consecutive monthly decline
The impact of the global pandemic caused UK business output to fall to its lowest level on record in 2020, despite a raft of support measures taken by the chancellor throughout the year, according to the latest Business Trends report from accountancy and business advisory firm BDO.
The BDO Output Index, which provides the most comprehensive snapshot of business output by weighting macroeconomic data from the UK’s main business surveys, averaged 73.62 in 2020. This figure is significantly lower than any other year since the index began in January 2005. Previously, the lowest annual average had been 83.28, which was recorded during the Great Recession in 2009.
Despite the end of the second national lockdown in early December, a return to the tier system failed to significantly increase business output. BDO’s Output Index increased by only 0.07 points during December, leaving the index at 69.13 points - well below the 95-mark which indicates output growth. BDO’s Output Index increased by six times this pace (0.43 points) in December 2019. The weak December figures are particularly concerning given the importance of the Christmas period for millions of UK businesses.
Download December 2020 report
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.