Business confidence rising

UK business confidence has reached a twelve month high, according to BDO’s latest Business Trends report say Harris & Co chartered accountants Northampton who specialise in providing accountancy services to small and medium sized bsuinesses.

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, with manufacturers demonstrating particularly strong improvement, moving up from 90.8 to 93.7.

During the same period the BDO Employment Index, which measures UK businesses’ hiring intentions over the next two quarters, hit its highest level since August 2011, which the firm says shows that the private sector will help to offset continuing public sector job cuts.

However, there was less good news for the economy as a whole, as neither the Optimism nor the Output indices have yet hit the 95.0 mark that indicates growth, while the BDO Inflation Index reached its highest reading since January last year.

A separate report from the Ernst & Young ITEM Club says consumer spending is on the up, but is not forecast to return to pre-recession levels for another two years. Its research indicates consumer spending will grow by 1.2% this year before accelerating to 1.9% in 2014.

The forecast is for further spending growth of 2.2% in 2015, at which point the level of spending will have returned to its pre-financial crisis peak, and 2.6% a year from 2016-2020.

Peter Spencer, chief economic advisor to the Ernst & Young ITEM Club, said: ‘The Treasury’s plan to move from an economy dependent on consumption to one led by exports and business investment has been put on hold. The UK has essentially returned to relying on the consumer to drive economic growth.’