Summer spending boost lifts business activity but confidence remains fragile

BDO’s Output Index returns to growth in July as services such as hospitality and retail benefit from tourism and World Cup summer boost
Business Optimism Index improves modestly but manufacturers stay cautious
Ongoing geopolitical and domestic uncertainty continues to weigh on labour market

UK business activity returned to growth in July as a summer boost from consumer spending helped lift the services sector, according to the latest Business Trends report from accountancy and advisory firm BDO LLP. However, business confidence remains subdued, suggesting this recovery is unlikely to be sustained without targeted government support.

BDO's Output Index rose to 95.29 in July, up from 93.41 in June, exceeding the level where activity is judged to be growing rather than shrinking. The rebound was driven almost entirely by the services sector, with hospitality and retail benefiting from increased domestic tourism, as well as a World Cup uplift.

This boost in services spending and an initial “Burnham bounce” following the Prime Minister’s appointment contributed to a modest rebound in business optimism from last month’s five-year low, rising to 89.96 from 88.45 in June. However, the Optimism Index remains firmly below the long-term growth threshold.

Although July's figures point to a more positive month for UK businesses, separate research from BDO suggests it was a month of two halves. BDO's latest High Street Sales Tracker shows last month’s retail performance was volatile, with momentum fading in the later weeks of July.

At the same time, confidence in the manufacturing sector weakened from 94.53 in June to 91.83 in July, as businesses continue to face elevated energy costs and ongoing supply chain uncertainty, suggesting that recent improvements in activity are unlikely to mark a sustained recovery. This reinforces the picture of a short-term uplift driven by seasonal spending rather than stronger underlying demand.

Meanwhile, the BDO Employment Index, a combination of hiring intentions, headcount and labour demand, held steady at 93.08, remaining close to its recent 15-year low. While hiring conditions remain subdued, this is the first month since May that the Index hasn’t declined, offering hope that stabilisation is on the horizon.

The outlook for the labour market remains soft, with continued tensions in the Middle East threatening to keep input costs elevated and margins under pressure. Combined with caution in the lead-up to Autumn’s Budget, these factors continue to weigh on business confidence and hiring.

Scott Knight, Head of Growth at BDO, said: "There’s nothing quite like a summer of sun and football to give a boost to the economy, but sadly it can’t last forever. Without greater certainty around the government’s economic policies and a reduction in geopolitical tensions, any improvement is likely to be temporary, seasonal and short-lived.

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.

	July 2026 (figures in this report)	June 2026	May 2026	April 2026	March 2026
BDO Optimism Index	89.96	88.45	88.36	92.37	91.83
BDO Output Index	95.29	93.41	98.56	98.10	97.79
BDO Inflation Index	101.45	102.70	102.15	101.36	99.30
BDO Employment Index	93.08	93.08	93.06	93.08	93.28

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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