Employment, business optimism, output & employment fall as threat of recession looms over winter

Employment, business optimism, output & employment fall as threat of recession looms over winter

  • BDO’s Employment Index falls for third consecutive month to its weakest reading since 2014 
  • Output Index falls for third consecutive month largely down to a decline from the manufacturing sector, as recession looms 
  • Business optimism declines as supply chain pressure mounts and consumer related headwinds persist
Business confidence, output and hiring intentions continued to fall in September as economic activity contracted amid ongoing inflationary headwinds and a looming threat of recession, according to the latest Business Trends report from accountancy and business advisory firm, BDO. 

The BDO Employment Index recorded its weakest reading in nearly a decade, falling for the third consecutive month to 102.72 (-2.23 points), as businesses struggle to maintain staffing numbers amid higher borrowing costs, elevated wage growth and weaker customer demand. Whilst September’s figure remains in positive territory, further downward pressure on the Employment Index could follow as a recession looms. 

September marks the weakest reading on BDO’s Employment Index since September 2014, when recovery from the global financial crisis stalled. Sectors currently witnessing the most pressure on jobs include construction, support services, food services, and wholesale and retail. 

The Output Index declined for a third consecutive month in September to 91.87, marking two months of recordings below the crucial 95-point that divides expansion from contraction. The last time the Index hit such a low was in March 2021, when the economy was still subject to restrictions from the third national lockdown.

The decline in output was driven by manufacturing, which fell back into negative territory in September with a reading of 90.10 as pressure on commodity prices drove down production levels for manufactures. While the services sector sub-index rose slightly to 92.09, it remained in negative territory for the third consecutive month.

The sub-95 readings on both Services and Manufacturing Output Indices suggests two of the economy’s major sectors are tightening with quarterly GDP contractions forecasted over the next two quarters.

Against this backdrop of continued cost of living pressures, elevated interest rates, and weak output, UK business confidence also slipped in September for the second time in the three months, falling to 99.79. The 0.57-point downturn was driven in large part by the drop in output across the manufacturing sector, heightened borrowing costs, and uncertainty over government policy. 

September saw a slight uptick in BDO’s Inflation Index, reaching 100.52, having stood at 100.47 in August – putting an end to ten consecutive months of decline. The Inflation Index last saw a monthly uptick in October 2022, when prices were subject to upward pressure as a result of rising energy bills.  This month’s increase was driven by a rise in commodity prices amid curtailed supply chains. Consumer price inflation is expected to have continued decelerating, with inflation appearing to have passed its peak in many key consumption categories such as food, transport, and energy.

Kaley Crossthwaite, Partner at BDO LLP, said:

“An even more pessimistic outlook from businesses, declining output and the lowest reading on the Employment Index in nine years are mounting indicators of the slowdown in economic activity predicted over the winter months. 

“With the threat of recession on the horizon, businesses are understandably feeling the pressure. More needs to be done to offer businesses support to weather the storm and drive their growth through the challenging months ahead.” 


Note to editors


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

The organisations we work with are Britain’s economic engine –entrepreneurially-spirited, high-growth businesses that fuel the economy.  

We understand the ambitions and entrepreneurial mindset of those we work with and have the global reach, integrity and expertise to help people and businesses succeed.  

BDO LLP operates in 18 offices across the UK, employing 7,500 people offering tax, audit and assurance, and a range of advisory services. BDO LLP is the UK member firm of the BDO international network.

BDO’s global network
The BDO global network provides business advisory services in 164 countries, with 95,000 people working out of 1,713 offices worldwide. It has revenues of $11.8bn.

Business Trends
BDO’s Business Trends is the ‘poll of polls’ regrouping data from the UK’s main business surveys, calculated by taking a weighted average of the results.

BDO’s Employment, Inflation, Optimism and Output Indices are 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, the Markit and Chartered Institute of Purchasing and Supply’s (CPS) Surveys of Manufacturing and of Services; the DG ECFIN industrial and services confidence indices; the RICS construction market survey; the Manpower Employment Outlook Survey; and Eurostat’s monthly business surveys.
Taken together the surveys cover over 4,000 different respondent companies, covering a range of different industries and business functions, and make up the most representative measure of business trends available.


Email: media@bdo.co.uk 

Verriin Kaur
Email: vkaur@headlandconsultancy.com 
Tel: (+44) (0)7786 767582

Ella Hatfield 
Email: EHatfield@headlandconsultancy.com
Tel: (+44) (0)77 9868 7042