Services sector brings economic boost but businesses face uncertain outlook
Services sector brings economic boost but businesses face uncertain outlook
- BDO Output Index buoyed to highest level in 12 months by stronger services sector activity
- BDO’s Employment Index remains near 15-year low, weighing on business confidence alongside global uncertainties
A bounce in services sector activity pushed UK business output to its highest level in a year, according to the latest Business Trends report from accountancy and advisory firm BDO LLP.
BDO’s Output Index, which measures activity across key sectors in the UK economy, increased to 98.80 in February, up from 97.67 the previous month. This increase marked three consecutive months of recovery following improvements in sales pipelines and new customer enquiries for services companies.
Domestically, business rates relief was also a likely factor in February’s service sector bounce, boosting key parts of the hospitality sector including pubs and music venues.
However, businesses face a difficult external outlook amid geopolitical uncertainties and challenging macro conditions. The evolving situation in the Middle East and developments around tariffs have the potential to weigh on companies.
BDO’s Employment Index – which reflects trends in hiring intentions, headcount and labour demand to provide a broad snapshot of UK labour market conditions rather than an absolute headcount – held at 93.30 in February, continuing a sustained run of multi-year lows. The BDO Employment index is now at its weakest reading in nearly 15 years (since March 2011).
While the pace of decline in the Employment Index has stabilised since the start of the year, there are limited signs of meaningful recovery in the near term.
Despite February’s services bounce, persistent weakness in the labour market is adding to cautiousness amongst UK businesses, which is likely to remain until labour market conditions improve.
Scott Knight, Head of Growth at BDO, said:
“Global disruption puts the spotlight firmly on the economy. While momentum is building in pockets of the economy, real growth is impossible without targeted action to fix the floundering labour market.”
ENDS
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.
BDO’s Business Trends is comprises multiple surveys covering 4,000 respondents. Further information on inputs and the data included is available on request, but please note the ONS Labour Force Survey is not one of them.
| February 2026 (figures in this report) | January 2026 | December 2025 | November 2025 | October 2025 | |
| BDO Optimism Index | 93.45 | 90.04 | 90.01 | 93.45 | 93.30 |
| BDO Output Index | 98.80 | 97.67 | 96.54 | 97.28 | 96.65 |
| BDO Inflation Index | 98.51 | 99.73 | 98.80 | 99.07 | 99.28 |
| BDO Employment Index | 93.30 | 93.30 | 93.32 | 93.53 | 93.95 |
Note to editors
BDO LLP operates in 18 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to mid-sized, entrepreneurially-spirited, high-growth businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.
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 166 countries and territories, with more than 119,000 people working out of 1,800 offices worldwide. It has revenues of US$15bn.
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