Strength across the services sector drives highs for business output amid weak manufacturing perform

Strength across the services sector drives highs for business output amid weak manufacturing perform

  • BDO’s Output Index hits an eight-month high despite the manufacturing sector recording its worst performance in almost three years
  • Strength across services output continues to drive net positivity across the Optimism Index making up for a two year low in optimism for manufacturing businesses 
  • Increased confidence in the economy’s resilience and falling inflation drives a third monthly uptick in the Employment Index

Continued strength across the UK services sector has driven increases in business output and optimism, according to the latest Business Trends report from accountancy and business advisory firm, BDO.

BDO’s Output Index reached an eight-month high of 99.80 in April, driven by a jump of 4.53 points across the Services Output Index as conditions across this sector improved. The sector last saw such an improvement in January 2022. 

This growth was partially offset by a drop in the Manufacturing Output Index, taking it to 82.94, its worst performance in almost three years, since the early months of the pandemic. 

Despite this, the overall Output Index now sits clear of the 95-point mark, the point of expansion, indicating growth in the economy in April. 
It’s a similar story for BDO’s Optimism Index which has been buoyed by stronger-than-expected consumer activity and subsequent positivity across the services sector to reach its strongest reading since August 2022 at 98.22. 

This is contrasted by the fall in optimism across the manufacturing sector, as businesses suffer from the effects of various economic headwinds including high input price pressures and ongoing supply chain disruption. These economic burdens caused a fall of 2.16 points for the Manufacturing Optimism Index – its lowest level since February 2021. 

An overall stronger sentiment towards resilience in the UK economy reflects the ongoing decline in inflation as April saw the BDO Inflation Index dip to its lowest point in 18 months. The index now stands at 107.55 points as both input and consumer price pressures subsided. 

The BDO Employment Index witnessed a third consecutive increase in April, driven by an uptick in the number of people in work, taking the Index to 111.07.

Whilst labour market conditions and growth prospects for the UK economy remain strong, higher interest rates are expected to weigh on economic activity and put upward pressure on the unemployment rate, with a peak of 4.3% forecasted for H2 2023.

Kaley Crossthwaite, Partner at BDO LLP, said:

“A tale of two sectors has emerged over the past few months as the resilience of the UK economy relies almost solely on the outlook for the improving services sector, as manufacturing businesses face an ongoing downturn. 

“Supply side issues and energy price increases are expected to persist over the coming months and whilst there are signs that the worst may be over, particularly with input price inflation, this sector will need continued support to take the pressure off services.”


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.


April 2023

(Figures for this report)

March 2023

(Figures for this report)


February 2023


April 2022

BDO Optimism Index





BDO Output Index





BDO Inflation Index





BDO Employment Index





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 17 offices across the UK, employing 7000 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 and territories, with 111,300 people working out of 1,803 offices worldwide. It has revenues of US$12.8bn.

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. Together, they make up the most representative measure of business trends available.


Ellie Chatterton
Tel: +44 (0)75 5117 1933

Verriin Kaur
Tel: (+44) (0)7786 767582