UK business output falls to lowest level since 2005

11 January 2021

  • 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.

Elsewhere in the report, the BDO Optimism Index rose by 0.26 points in December to reach 86.96. This came as the second national lockdown restrictions were temporarily lifted, and as the UK began the rollout of COVID-19 vaccinations on 7th December, which represented the first definitive source of light at the end of the tunnel for businesses. Following the introduction of a third nationwide lockdown this month, this increase in sentiment is expected to be short-lived.

The report also found that the rate of UK employment continued its downward trajectory for a second consecutive month in December, declining by 0.59 points to 108.15. The latest data suggest that the slow but steady trickle of job losses continued at the end of the year, with the latest lockdown likely to place further pressure on the BDO Employment Index in the months ahead.

Commenting on the results, Kaley Crossthwaite, Partner at BDO LLP, said: “These figures reinforce just how stark the economic impact of the pandemic has been. As we enter a third national lockdown, crippling challenges will continue to plague businesses in the weeks and months ahead.  Successful and rapid roll-out of COVID-19 vaccines will be the single biggest driver of business recovery.”

- 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. 100 = average value. Above 95 = positive.

  December 2020 
(Figures for this report)
November 2020  October 2020  December 2019
BDO Output Index 69.13 69.06 77.09 96.47
BDO Optimism Index 86.96 86.7 88.94 95.72
BDO Inflation Index 92.2 92.5 94.19 95.27
BDO Employment Index 108.15 108.74 109.49 112.25

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. 

Methodological notes

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 6,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

The BDO global network provides business advisory services in 167 countries, with 91,000 people working out of 1,650 offices worldwide. It has revenues of $10.3bn. 

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.