Confidence returning to UK business

BUSINESSES in the UK are starting to regain their confidence, according to a new report.

The latest Business Trends Report by accountants and business advisers BDO LLP reveals that businesses are now finding that the post-Brexit slump has not been as severe as expected, after confidence fell to a three-year low last month.

Business optimism, which predicts growth six months ahead, is up to 98.7 from 97.9, well above the 95.0 level which would indicate the start of recessionary conditions. It is climbing back toward the 100.0 value, which signals the UK’s long-term trend growth rate of just over 2 per cent. Business output, which reflects companies’ current experience of orders, has fallen again to 97.4 from 98.2. The output index is a good indicator for where GDP will be for the three months ahead.

Taken together, these results suggest that the UK experienced a short, sharp fall in business activity postreferendum, but that businesses are confident this will quickly reverse.

Further good news is that jobs continue to be created. BDO’s employment index, which indicates firms’ intentions to hire, remains at 100.9, above the long-term trend.

Following the fall in the value of sterling, the inflation index has now rallied and sits at 101.4 following a prolonged period of flatness, suggesting that businesses expect inflation to rise over the coming months.

Peter Hemington, partner at BDO LLP, said: “After the immediate Brexit scare, businesses are becoming more confident as they start to find that, for most of us, it’s back to business as usual. But ongoing uncertainty and the likely longer-term damage if we exit the single market, are concerns which continue to justify Government support for growth.

“The Government must prioritise taking advantage of cheap borrowing costs to invest in infrastructure and protect the growth of our economy.”

Meanwhile, a report by Markit and Visa showed that spending rose across four out of eight sectors in the year to August.

Hotels, bars and restaurants saw a 4.3 per cent jump in spending.

Expenditure in household goods rose 0.5 per cent.

Consumers spent 0.1 per cent more on food, beverages and tobacco.

A 2 per cent rise in recreation and culture spend was chalked up to the growing popularity of “staycations”. Visa suggested this was in line with reports claiming that UK households opted to spend holidays in Britain rather than travelling overseas.

‘It’s business as usual for most of us’