Sunday, September 27, 2020

UK business output hits 17-month low

A decline in output across the services and manufacturing sectors has caused BDO’s Output Index to drop to its lowest level in 17 months, falling by 0.65 points to 96.04 in November.

BDO’s Output Index, which is made up of BDO’s Manufacturing Output and Services Output indices, offers a snapshot of business productivity by weighting data from the UK’s main business surveys.

The constituent indices fell this month, with the Services Output Index sinking sharply by 0.72 points to 97.19, and the Manufacturing Output also falling 0.16 points – the lowest point for each index so far this year. This has been predominantly caused by businesses choosing to run down their stockpiles once a further extension to the Brexit deadline had been agreed.

The results round off a negative year for each of the Indexes that comprise BDO’s Business Trends report. Every index covered by the report (Optimism, Output, Employment and Inflation) is down on average compared to November 2018. The biggest fall is the Manufacturing Output Index, which is down 10.47 points on average this year compared to last.

Commenting on the results, Peter Hemington, Partner at BDO LLP, said: “November’s figures mark the end of a disappointing year for UK businesses. All indices have been driven down by continued political uncertainty and a worsening global economic climate. Businesses are in need of an injection of Christmas spirit, but current indications point to a bleak December.”

Meanwhile BDO’s Optimism Index rose slightly throughout November, gaining 0.12 points to stand at 95.71. Such a rise is comparatively flat compared to the uplift in optimism seen in the run-up to previous general elections:

  • Ahead of the 2017 election, the Optimism Index jumped by 2.31 points
  • Ahead of the 2015 election, The Optimism Index rose 1.15 points

However, such rises are traditionally short lived, with BDO’s Optimism Index tending to fall after general elections.

Peter Hemington added: “Optimism has risen boldly in the run-up to previous elections, which has offset declines once a new government is in place. The fact that optimism remains comparatively sluggish could signal that a more dramatic slump in confidence is on the horizon.”

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