UK firms freeze hiring and investment as confidence flatlines
Key Points
- BDO's Output Index fell to 91.53 in June, its lowest since February 2021
- The Optimism Index has been below the 95-point growth threshold for 20 consecutive months
- The Employment Index held at 93.08, just above May's 15-year low
- BDO's Inflation Index hit 102.70, its highest in over three years
- Household energy bills rise from July, adding pressure on discretionary spending
UK businesses are delaying hiring and investment decisions as confidence remains stuck below growth levels for a 20th consecutive month, new figures from accountancy firm BDO show.
BDO’s Optimism Index registered 88.45 in June, barely moved from 88.36 in May and well below the 95-point threshold that separates growth from contraction. The firm’s Output Index fell to 91.53, down from 94.80 in May and its lowest reading since February 2021, when the UK was in its third Covid lockdown.
The Employment Index, which combines hiring intentions, headcount and labour demand, held at 93.08 in June, just above the 15-year low recorded in May. BDO said the figures show businesses caught in “wait-and-see mode”, managing costs and preserving flexibility rather than committing to new staff or spending.
The Services Output Index fell to 91.04 as fragile consumer confidence and delayed spending weighed on demand, while manufacturing dropped from 99.31 in May to 95.39 as the boost from stockpiling and frontloaded orders earlier in the year unwound.
Household budgets face further pressure from July, when energy bills rise. BDO said the increase will likely have knock-on effects for discretionary spending, compounding higher operating costs already facing businesses. The firm’s Inflation Index climbed to 102.70 in June, its highest level in more than three years, up from 102.15 in May.
“Business confidence has remained low for 20 consecutive months as businesses are trapped in survival mode. Rebuilding confidence will need to be tackled immediately by the next Prime Minister if the UK is to return to growth,” said Scott Knight, Head of Growth at BDO.
The Business Trends report draws on multiple surveys covering 4,000 respondents. BDO said the framework does not rely on Office for National Statistics survey data, instead combining independent UK business surveys, including sector PMIs, with forecasts from the Centre for Economics and Business Research.
The firm said this insulates the indices from data quality concerns surrounding official ONS statistics, including issues affecting the Labour Force Survey.
