Business optimism rebounds in August as firms now await Autumn Budget
Business optimism rebounds in August as firms now await Autumn Budget
- Sustained growth over summer led Output Index to highest level since January 2025
- Service sector resilience offset softer output in the manufacturing sector
- Services sector also drives Optimism to near two-year high
UK business activity reached its highest level since January 2025 in August, according to the latest Business Trends report from accountancy and advisory firm BDO LLP, with BDO's Output Index rising to 98.37 as resilient services activity continued to support growth despite ongoing geopolitical and inflationary pressures.
Business optimism also improved markedly in August to 94.22, marking the highest figure since just before 2024 Autumn Budget, which was Labour’s first since it returned to Government.
The Services Optimism Index rose particularly strongly, to 94.48 from 89.72 in July, as industries responded positively to the Government's business-friendly messaging ahead of the Autumn Budget. However, the durability of this improvement will depend on whether the Government's rhetoric is matched by meaningful measures in October's Autumn Budget.
BDO's Output Index remained in expansionary territory, rising to 98.37 in August, up from 98.22 in July. Growth continued to be driven by the services sector, with travel and leisure benefiting from seasonal demand. Export demand for services remained weak, tempering what was otherwise a positive month for the sector.
The Manufacturing Output Index also remained in expansionary territory at 95.58, although it edged lower as the temporary boost from precautionary stockpiling continued to fade and export demand softened.
Meanwhile, the BDO Employment Index, a combination of hiring intentions, headcount and labour demand, remained broadly unchanged at 93.10, hovering just above its recent 15-year low. While hiring remains subdued, the slowing pace of job losses points to a labour market that is stabilising rather than deteriorating further.
The Inflation Index rose to 102.18 from 101.45 in July, as the cost of doing business came under renewed pressure following remerging tensions in the Middle East. Both input costs and consumer price pressures are continuing to rise, with the impact of higher oil prices and the increase in the Ofgem price cap feeding through to business and household bills.
Scott Knight, Head of Growth at BDO, said: "With output on the up, it’s no wonder businesses are starting to feel a little less gloomy. However, all eyes are on Burnham and the Autumn Budget. Practical measures to reduce costs and unlock investment are essential if the Government is to turn sentiment into meaningful growth.”
ENDS
Overview of the BDO indices
An overview of all four indices is provided in the table below, detailing figures for the last four months to allow for comparison. 100 = average value. Above 95 = positive.
BDO’s Business Trends comprises multiple surveys covering 4,000 respondents. Further information on inputs and the data included is available on request.
The BDO Business Trends framework as a whole does not rely on ONS survey data. As a composite reading, the indices are constructed from the main independent UK business surveys, including the sector PMIs, combined with Cebr's own forecasts and economic judgement. The framework is therefore insulated from the data quality concerns currently surrounding official ONS statistics, including the issues affecting the Labour Force Survey.
|
August 2026 (figures in this report) |
July 2026 | June 2026 | May 2026 | April 2026 | |
|
BDO Optimism Index |
94.22 | 89.96 | 88.45 | 88.36 | 92.37 |
|
BDO Output Index |
98.37 | 98.22 | 98.18 | 98.14 | 98.10 |
|
BDO Inflation Index |
102.18 | 101.45 | 102.70 | 102.15 | 101.36 |
|
BDO Employment Index |
93.10 | 93.08 | 93.08 | 93.06 | 93.08 |
Note to editors
BDO LLP operates in 19 offices across the UK and Ireland, employing 8,500 people. It has revenues of £1.1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing (CR&O) services predominantly to the entrepreneurial, ambitious and growing mid-sized businesses that are driving growth in the UK and Ireland economies.
BDO LLP is the UK and Ireland member firm of the BDO Global network.
BDO Global
The BDO international network provides business advisory services in 169 countries and territories, with 95,000 people working out of 870 offices worldwide. It has revenues of US$11bn.
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