Buoyant labour market defies expectations as business optimism and output continue to decline

Buoyant labour market defies expectations as business optimism and output continue to decline

  • BDO’s Output Index has reached a 17-month low, sparking a fall in the Optimism Index, as fears of a recession hamper confidence and productivity.
  • Despite these headwinds, BDO’s Employment Index has remained resilient, surpassing pre-pandemic levels to reach its highest reading since January 2019.
  • However, rising inflation and lower output promise a weakened long-term forecast as a recession looms.

The BDO Output Index has reached its lowest level since February last year – when productivity was hampered by a third national lockdown – and could experience further decline, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

The Output Index fell 2.66 points in June to 97.73 and now sits well below 100, which denotes long-term average growth. This decline was driven by low activity in the manufacturing and services sectors due to supply chain disruption, higher imported material costs and weakened consumer spending power.

Waning productivity has led to a corresponding dip in the Optimism Index for the third month in a row, as the decline in output and fears of a recession continue to affect business confidence. The index experienced a decrease of 0.10 to 101.83, its lowest reading since April 2021.

The labour market has remained resilient in the face of these downturns, however, with the Employment Index surpassing pre-pandemic levels to reach its highest figure since January 2019. June saw the eighth consecutive monthly increase for the Index, which now stands at 114.56.  

The Inflation Index reached an all-time high of 117.85. This was largely driven by a 3.05-point increase in the Input Inflation subindex, reflecting the continued upward pressure on input prices as a result of shortages, supply chain disruption and a weakening currency.

Commenting on the indices, Kaley Crossthwaithe, Partner at BDO LLP, said:

“The continued falls in output and confidence provide a stark warning of the challenges businesses face in the coming months, with a perfect storm of staffing shortages, an expected increase in the energy price cap, and weakened consumer spending.

“Despite its recent resilience, inflationary pressures and fears of a recession look to dampen the outlook for the labour market as economic activity is predicted to decline in the second half of this year.”


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.



June 2022

(Figures for this report)


May 2022


April 2022


June 2021

BDO Optimism Index





BDO Output Index





BDO Inflation Index





BDO Employment Index





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