Business Trends
Business Trends
UK employment stagnates at 13-year low but output shows signs of summer recovery
- UK employment stalls as labour costs weaken business confidence
- Services sector leads growth with slight rebound in output, driven by stronger consumer spending and good weather
- UK businesses remain cautious amid policy uncertainty and elevated cost pressures
The UK’s employment outlook remains stagnant, with labour market stuck near its lowest level in over a decade, even as the broader economy shows early signs of a summer recovery.
The Employment Index fell again in June to 94.22 from 94.32 the previous month, nearly at a 13- year low. Despite some positive output signals from the services sector, hiring remains subdued as businesses continue to grapple with cost pressures, most notably the increase in National Insurance Contributions (NICs) introduced in April.
Demand for labour is adjusting in response, with many firms holding back on recruitment. This caution is reflected in payrolled employment figures, which fell by 109,000 in May — nearly twice the drop seen in April — pointing to a possible acceleration in job losses.
Business confidence continues to remain underwhelming, with the Optimism Index falling to 91.58 from 92.30 in the previous month. Core cost pressures, particularly around labour, continue to drag on margins, with the prospect of further tax rises in the Autumn adding further to a cautious sentiment. Greater certainty following recent trade agreements with the US, EU and India offered a small boost to manufacturing business sentiment, but the sector remains volatile with no clear easing of these headwinds in sight. The Business Trends report predicts optimism will stay well below long-term averages through the second half of the year.
Scott Knight, Head of Growth at BDO, said: “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row.
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.