Optimism among manufacturers reaches 20-month high

Manufacturing sector optimism returned to growth for the first time since June 2015, BDO said. Picture: Andrew Milligan/PA Wire
Manufacturing sector optimism returned to growth for the first time since June 2015, BDO said. Picture: Andrew Milligan/PA Wire
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A report has found signs of “encouraging economic prospects” for Scotland and the UK over the next six months, despite uncertainty following the Brexit vote and the US presidential election.

The latest business trends report by accountant and business adviser BDO found that optimism amongst manufacturers has reached a 20-month high. Similarly, confidence in the services sector has risen to a 14-month peak.

Businesses are surprisingly confident about the short term

Martin Gill

Martin Gill, head of BDO in Scotland, said: “The economy seems to be remarkably resilient both in Scotland and the UK as a whole.

“Businesses are surprisingly confident about the short term, encouraged by the opportunities our cheaper currency and a better-performing global economy have created. These have provided a much-needed short-term boost for our economy, particularly our manufacturers.”

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BDO’s optimism index, which indicates how firms expect their order books to develop in the coming six months, continues to rise and now sits at 103.7, up from 102.2 in December, above its long-term trend.

A sub-index looking purely at manufacturing, has risen to 102.2 from 99.4, passing the 100 mark – which indicates growth – for the first time since June 2015, BDO said. The services optimism sub-index also increased from 102.7 to 103.9 this month – a 14-month high.

BDO’s output index, which indicates how businesses expect their order books to develop in the next three months, has increased for the third consecutive month.

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But BDO cautioned that despite the immediate benefit of sterling’s sharp fall in value and the optimistic mood among businesses, sterling’s devaluation represents a “double-edged sword” as it continues to contribute to rising inflation. Its inflation index has increased to 104.5 from 103.8, with the upward trend set to continue.

Gill added: “Government still has much to do in these uncertain times if the UK is going to stay on the right economic track.”

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