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Optimism of UK businesses hits seven-year low

11 November 2019

  • Business confidence plummets to its lowest level since 2012
  • Declines witnessed across the manufacturing and services sectors
  • Manufacturing output falls for a thirteenth consecutive month

A fall in optimism in both the services and manufacturing sectors has caused business confidence to hit its lowest level since March 2012, according to a new report from accountants and business advisors BDO LLP.

BDO’s Optimism Index, which provides the most comprehensive snapshot of business sentiment by weighting macroeconomic data from the UK’s main business surveys, fell by 0.67 points during October to 95.59, just above the 95 level which indicates zero growth. This fall was predominantly driven by a substantial decline in manufacturing optimism - which plummeted 3.38 points - while the services sector also slipped 0.34 points.

Dwindling sentiment comes as UK business output endured a tough October, with slides in both sectors pulling the index down by 0.75 points to 96.69. Manufacturing fared the worst, falling for a thirteenth consecutive month to hit 87.10 points - a 0.90 drop from September and well into recessionary territory - as weak global demand and Brexit-based uncertainty continued to cast gloom over the sector.

Elsewhere, the BDO Inflation Index fell by 1.11 points to 94.25 in October. This brings the index to its lowest level since May 2016 - the month before the EU referendum - the outcome of which drove the pound down, causing a spike in import inflation which has taken two years to subside.

Commenting on the findings, Peter Hemington, Partner at BDO LLP, said: The last time we saw business confidence at such a low level was when the country was staggering out of the doldrums caused by the global financial crisis. With an unpredictable general election looming, continued political volatility in the UK remains a key driver of falling optimism. 

“Given British businesses are telling us that new hires and investment are hard to justify at the moment, growth will continue to remain elusive until there is some kind of resolution of the Brexit conundrum.”

To download BDO’s Business Trends New Economy report and find out more, visit


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. 100 = average value. Above 95 = positive.

  October 2019
(figures for this report)



October 2018
(equivalent report last year)

BDO Output Index 96.69 97.44 96.62 97.72
BDO Optimism Index 95.59 96.26 96.26 101.25
BDO Inflation Index 94.25 95.36 96.75 101.27
BDO Employment Index 111.82 112.81 112.50 114.11


Note to editors

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world. 

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy.  

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.  


BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 162 countries, with 80,000 people working out of 1,600 offices worldwide. It has revenues of $9bn.  

Methodological notes

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.


Tom Grant
at Headland on behalf of BDO LLP

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