Warning over optimism in months ahead
Business optimism is expected to stagnate over the coming months as firms grapple with the challenges posed by the impact of the Omicron variant.
The latest Business Trends report from accountancy and business advisory firm BDO showedbothoptimismandoutput growth across the UK fell in December as the variant began to take hold and fresh restrictions were imposed.
The report’s optimism index slipped by 0.46 points to 103.81, andwithsupplychainchallenges likely to continue into 2022, Bdowarnedthatoptimismwill “at the very least” stagnate over thenextquarter,withthepotential for significant downward pressuresiffurtherrestrictions are introduced.
The new strain of the virus has also de-railed the progress made by the report’s output index, which fell by 2.66 points indecemberto108.18following a four-month high in November.
The services output Index was the hardest hit, falling 3.2 points to 109.76 in December – the largest drop since August – as businesses contend with cancellations, staffing and supply chain issues. Despite these headwinds, the index remains above the 95-level which indicates growth, highlighting the extent of economic recovery in the past year.
Despite the difficult outlook facedbybusinesses,thereport’s employment index crept up by 0.99 points in December to reach 109.08, the highest reading since before the pandemic in March 2020.
BDO said the reading underline the strength of the UK’S labour market as strong hiring intentions amongst employers are driven by competition for talent, particularly in the services and hospitality sectors.