Printable version
E-mail this to a friendUK business confidence is at its highest point since May 2012, pointing to improved business conditions for the rest of 2013, according to the latest Business Trends report by accountants and business advisers BDO LLP.
BDO’s Optimism Index, which predicts business performance two quarters ahead, moved up for the fourth consecutive month, to 93.6 in May from 93.0 in April. BDO’s Output Index, which predicts short-run turnover expectations, also improved in May, to 94.4 from 94.1, an 11-month high. The Output Index for manufacturers showed particular improvement, moving up substantially from 90.8 to 93.7.
Improving confidence is feeding in to businesses’ hiring intentions. The BDO Employment Index, which measures UK businesses’ hiring intentions over the next two quarters, rose to 96.6 in May, the index’s highest since August 2011. This is the fifth consecutive month that the index has been at or above the crucial 95.0 level that represents employment growth, and indicates that the private sector will help to offset the effects of continuing public sector job cuts.
However, in spite of these improvements, dangers to the UK’s economic recovery remain. Inflationary expectations rose again in May, as the BDO Inflation Index climbed to 104.2 from a previous reading of 103.4. This is the highest reading for the Index since January 2012 and points to rising costs for businesses, which could impact on their bottom lines.
In addition, although business confidence has improved, both the Optimism and Output indices remain below the 95.0 mark that indicates growth. This suggests that although business conditions are improving, risks still remain to the UK’s economic outlook.
Peter Hemington, Partner, BDO LLP, commented: “It’s encouraging to see that UK business confidence has continued its upward trend, and that businesses have retained their healthy hiring intentions for a fifth consecutive month.
“However the Government must do more to achieve the robust economic growth that remains tantalisingly out of reach. The Government must look to ensure more funds are reaching British businesses through lending, in order to help them drive the UK’s economic recovery.”
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.
Note to editors
Accountancy and business advisory firm, BDO LLP, is the UK member firm of the BDO International network. BDO LLP has recently merged with PKF (UK) LLP to form a new force in the mid-market. The firm now employs 3,500 people across 23 UK locations, generating revenues approaching £400m.
The combined fee income of all the BDO Member Firms, including the members of their exclusive alliances, was $6.015 billion in 2012. The global network provides business advisory services in 138 countries, with almost 55,000 people working out of 1,204 offices worldwide.
BDO LLP has a clear ambition to be the firm known in the market for exceptional service delivered by empowered people. The 2011/12 Mid Market Monitor analysis – completed in April 2012 – shows that BDO has now indeed become market leader for client satisfaction – outperforming all its major competitors and the only organisation to see an improvement over the past three years.
BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members’ names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Services Authority to conduct investment business.
BDO is the brand name for the BDO International network and for each of the BDO Member Firms.
BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, and BDO (Isle of Man) LLC are associate firms and licensed to operate within the international BDO network of independent member firms.
Methodological Notes:
The BDO Monthly Business Trends Indices are prepared on behalf of BDO LLP by the centre for economics and business research ltd., a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques.
The indices are calculated by taking a weighted average of the results of the UK’s main business surveys. It incorporates 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; and the Markit/CIPS Manufacturing and Services PMI data
Taken together the surveys cover over 4,000 different respondents from companies employing approximately five million employees. The respondents cover a range of different industries and a range of different business functions. Together they make up the most representative measure of business trends available.
The surveys are weighted together by a three-stage process. First, the results of each individual survey are correlated against the relevant economic cycles for manufacturing and services. This determines the extent of the correlations between each set of survey results and the relevant timing relationships. Then the surveys are weighted together based on their scaling, on the extent of these correlations and the timing of their relationships with the relevant reference cycles.
Finally, the weighted total is scaled into an index with 100 as the mean, the average of the past two cyclical peaks as 110 and the average of the past two cyclical troughs as 90.
The results can not only be used as indicators of turning points in the economy but also, because of their method of construction, be seen as leading indicators of the rates of inflation and growth.
http://www.bdo.uk.com/news.html
