Tuesday, August 16, 2022

Biggest monthly fall in business output since first lockdown

The impact of national lockdown restrictions in January caused UK business output to fall at a rate not seen since April 2020, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

The BDO Output Index, which provides a comprehensive snapshot of business output by weighting macroeconomic data from the UK’s main business surveys, fell by 5.38 points in January to 70.44. This is a seven-month low for the Index. Having borne the brunt of the restrictions, the services sector drove the decline, with output dropping for a third consecutive month in January.

Despite this downturn, economic activity remains significantly higher than it did in April 2020, when the BDO Output Index plummeted to 44.90 points. This is largely because businesses have had time to adapt to the current restrictions, enabling many to continue providing some level of service. BDO’s Services Output Index therefore remains 24.14 points higher than it stood in April 2020 when the first nationwide lockdown took hold.

Elsewhere in the report, the BDO Optimism Index hit a six-month low as it edged downwards from 86.96 to 86.34 points in January. This comes despite the Brexit deal secured at the end of December, which provided some clarity on the UK’s future relationship with Europe. With stories since emerging of difficulties in trading with the EU, optimism may take a further knock as businesses continue to navigate checks, delays and red tape.

Commenting on the results, Richard Rose, partner and head of BDO LLP in the Midlands, said: “While these figures illustrate the severity of the impact that national lockdown restrictions are having on the economy, they also show the resilience of UK businesses – many of which have developed new procedures, products and services to allow them to continue trading.

“With the government expected to outline the nation’s ‘route map’ out of lockdown in the coming weeks and as the UK’s successful vaccination rollout continues, sentiment should rebound providing disruption to trade across the channel is minimized with further government support.”

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