Business Trends

Business Trends

Employment, business optimism and output fall as threat of recession looms over winter months  

  • Employment Index falls for third consecutive month to its weakest reading since 2014  
  • Output Index falls for third consecutive month largely down to a decline from the manufacturing sector, as recession looms  
  • Business optimism declines as supply chain pressure mounts and consumer related headwinds persist 

Business confidence, output and hiring intentions continued to fall in September as economic activity contracted amid ongoing inflationary headwinds and a looming threat of recession.  

The BDO Employment Index recorded its weakest reading in nearly a decade, falling for the third consecutive month to 102.72 (-2.23 points), as businesses struggle to maintain staffing numbers amid higher borrowing costs, elevated wage growth and weaker customer demand. Whilst September’s figure remains in positive territory, further downward pressure on the Employment Index could follow as a recession looms.  

September marks the weakest reading on the Employment Index since September 2014, when recovery from the global financial crisis stalled. Sectors currently witnessing the most pressure on jobs include construction, support services, food services, and wholesale and retail.  

The Output Index declined for a third consecutive month in September to 91.87, marking two months of recordings below the crucial 95-point that divides expansion from contraction. The last time the Index hit such a low was in March 2021, when the economy was still subject to restrictions from the third national lockdown. 

The decline in output was driven by manufacturing, which fell back into negative territory in September with a reading of 90.10 as pressure on commodity prices drove down production levels for manufactures. While the services sector sub-index rose slightly to 92.09, it remained in negative territory for the third consecutive month. The sub-95 readings on both Services and Manufacturing Output Indices suggests two of the economy’s major sectors are tightening with quarterly GDP contractions forecasted over the next two quarters. 

Against this backdrop of continued cost of living pressures, elevated interest rates, and weak output, UK business confidence also slipped in September for the second time in the three months, falling to 99.79. The 0.57-point downturn was driven in large part by the drop in output across the manufacturing sector, heightened borrowing costs, and uncertainty over government policy.  

September saw a slight uptick in the Inflation Index, reaching 100.52, having stood at 100.47 in August – putting an end to ten consecutive months of decline. The Inflation Index last saw a monthly uptick in October 2022, when prices were subject to upward pressure as a result of rising energy bills.  This month’s increase was driven by a rise in commodity prices amid curtailed supply chains. Consumer price inflation is expected to have continued decelerating, with inflation appearing to have passed its peak in many key consumption categories such as food, transport, and energy. 
Kaley Crossthwaite, Partner at BDO LLP, said: 

“An even more pessimistic outlook from businesses, declining output and the lowest reading on the Employment Index in nine years are mounting indicators of the slowdown in economic activity predicted over the winter months.  

“With the threat of recession on the horizon, businesses are understandably feeling the pressure. More needs to be done to offer businesses support to weather the storm and drive their growth through the challenging months ahead.”


Download September 2023 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.

Download the latest report