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UK economy resilient heading into 2016

12 October 2015

Decisive action needed to head off risks from gloomy global economic outlook

UK businesses expect growth to continue into 2016 as business optimism increased for the first time in over six months, according to the latest Business Trends Report by accountants and business advisers BDO LLP.

BDO’s Optimism Index increased to 102.2 from 101.9 this month, the first uptick in confidence since February this year. This confidence is underpinned by continuing low inflation rates, which are helping manufacturers in particular.  The BDO Inflation Index sits at 96.1 this month, showing that businesses expect input prices to rise slowly.

BDO’s Employment Index still sits at a high level (107.6) this month. Coupled with increasing wages, this suggests the consumer-led recovery is set to continue.

But businesses and policy makers cannot afford to be complacent - the IMF last week warned that the risk of a global recession is still on the horizon. BDO is calling for a boost in government and business investment to protect UK growth against future global economic tremors.  

Commenting on the findings, Peter Hemington, Partner, BDO LLP, said: 

“The UK economy looks set for continued growth in the coming months, but this should not lead to complacency.

“Policy makers must act to insulate the UK economy from the increasingly gloomy global economic outlook.  So far our recovery has largely been based on consumer spending, but we need business and public sector investment if we are to rebalance the economy, boost productivity, and make sure that companies thrive across the country. This will put the economy on the firmest possible footing for the potentially shaky coming months.

“Government has a vital part to play - speeding up infrastructure projects such as the electrification of the TransPennine Express would be an important boost. In addition, businesses should make sure that they are getting the best out of the UK’s workforce by focusing on improving skills to help solve the productivity puzzle.”

- Ends –

Overview of the BDO indices:

An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison.

 

September 2015

(figures for this report)

August 2015 July 2015

September 2014

(equivalent report last year)

BDO Optimism Index 102.2 101.9 103.3 105.0
BDO Output Index 104.3 104.5 104.4 103.3
BDO Inflation Index 96.1 95.9 95.2 96.6
BDO Employment Index 107.6 107.9 108.4 112.3

 

Note to editors

Accountancy and business advisory firm BDO LLP has a clear ambition to be known in the market for exceptional service delivered by empowered people. The 2014 Mid-Market Monitor shows that BDO is the market leader for client satisfaction for the third year running – outperforming all its major competitors.

BDO’s heartland is the mid-market. The UK mid-market accounts for less than 1% of all firms but delivers more than 33% of the UK's revenue - over £1 trillion - and one in four jobs. BDO’s Mid-Market Manifesto (www.midmarketmanifesto.com) calls for greater government focus on mid-sized businesses. 

BDO LLP

BDO LLP operates in 18 offices across the UK, employing 3,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO International network with revenues approaching £400m.

BDO International

The BDO International network provides business advisory services in 151 countries, with more than 60,000 people working out of 1,350 offices worldwide. It has revenues of $7.02bn. 

The BDO Monthly Business Trends Indices are prepared on behalf of BDO LLP by the centre for economics and business research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.

The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. It incorporates the results of the quarterly CBI Industrial Trends Survey (and the CBI Monthly Trends Enquiry which is carried out in the intervening months); the Bank of England Agents’ summary of business conditions; and the Markit/CIPS Manufacturing and Services PMI data

Taken together the surveys cover over 4,000 different respondents from companies employing approximately five million employees. The respondents cover a range of different industries and a range of different business functions. Together they make up the most representative measure of business trends available.

The surveys are weighted together by a three-stage process. First, the results of each individual survey are correlated against the relevant economic cycles for manufacturing and services. This determines the extent of the correlations between each set of survey results and the relevant timing relationships. Then the surveys are weighted together based on their scaling, on the extent of these correlations and the timing of their relationships with the relevant reference cycles.

Finally, the weighted total is scaled into an index with 100 as the mean, the average of the past two cyclical peaks as 110 and the average of the past two cyclical troughs as 90.

The results can not only be used as indicators of turning points in the economy but also, because of their method of construction, be seen as leading indicators of the rates of inflation and growth.

Contacts

Alex Dickie or Orla Swindells

at Blue Rubicon on behalf of BDO LLP

Tel: 0207 260 2700

Mobile: 07713309894

Email: [email protected]

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