Hiring intentions and business confidence fall as economic growth is expected to slow

Hiring intentions and business confidence fall as economic growth is expected to slow

  • BDO’s Employment Index declines in line with business confidence as manufacturing and services businesses tackle difficult trading conditions
  • Manufacturing Output falls to its lowest reading since towards the end of the UK’s first national COVID-19 lockdown
  • BDO’s Inflation Index sees a ninth consecutive monthly fall amidst declining input prices

Hiring intentions and business confidence saw declines across both the services and manufacturing sectors in July with economic growth set to slow, according to the latest Business Trends report from accountancy and business advisory firm, BDO.

BDO’s Employment Index fell for the first time in six months as businesses reduced vacancies whilst battling higher interest rates, weak global demand, and ongoing supply difficulties. The number of vacancies fell by 85,000 in Q2, while pay growth cooled.

This drop comes alongside a more pessimistic business outlook, highlighted by BDO’s Optimism Index falling in July for the first time in four months.

The 0.78-point downturn was driven by negative sentiment among manufacturers, who have been particularly exposed to elevated borrowing costs. These headwinds saw manufacturing optimism stand at 93.56, a fourth consecutive month below the crucial 95-point mark which divides expansion from contraction.

Whilst services optimism also declined by 1.10 point to 99.57 in July, the sub-index remains above the 95-point mark, indicating net-optimism across the sector despite the weaker reading. Further declines in both optimism and employment are expected with threats of a recession looming for Q4 and early 2024.  

BDO’s Output Index revealed starkly contrasting stories for the manufacturing and services sectors. Manufacturing output dropped sharply to 77.26 – its weakest reading since May 2020, when the sector was curtailed by the first national COVID-19 lockdown.

However, a 5.22-point pick up in services output drove an overall improvement of the headline index to 96.15 in July. Output now remains just above the 95-point of contraction, indicating marginal growth.

July saw BDO’s Inflation Index fall by 2.72-points to stand at 100.96, its lowest reading in over two years. This decline is expected to mirror slows in consumer inflation driven by a drop in energy prices following Ofgem’s lower price cap. A fall was also observed in input price inflation reaching 91.01 reflecting the dropping prices in global commodity markets.

Kaley Crossthwaite, Partner at BDO LLP, said:

“A more pessimistic outlook from businesses and consequent loosening of the labour market are the first indicators of the slow in economic growth expected towards the end of the year.

“With yet another hike in interest rates from the Bank of England last week, this downturn is only set to worsen in what should be a golden quarter for many, if more isn’t done to support businesses. To reverse these trends, Government needs to work more closely with industry to ensure firms of all sizes have tailored support in order to weather the storm, invest and grow.”



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 7500 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.



Ellie Chatterton
+44 (0)7904 050302
Verriin Kaur
(+44) (0)7786 767582