The latest Business Trends report from accountancy and business advisory firm BDO found that the services sector was the main driver of improving optimism as industries such as hospitality began to re-open.
BDO’s optimism index jumped from 99.85 in April to 109.71 in May, “significantly” above the long-term average of 100. This is the highest it has been since June 2014, when Europe began to emerge from the Eurozone crisis and before Brexit-related uncertainty took hold. It also marks the fourth consecutive month of growth for the Index.
Although the services sector was buoyant, the improvement in BDO’s manufacturing optimism index was slightly more subdued, rising from 99.79 in April to 102.98 in May.
The data also suggests price pressures are mounting in the UK economy, and are likely to have a tangible impact on consumers. BDO said this was being caused by a combination of a resurgence in demand as restrictions are lifted, as well as supply-side disruptions associated with the pandemic and Brexit.
BDO partner Kaley Crossthwaite said: “The latest figures show that most businesses, buoyed by the success of the vaccine rollout and the further easing of restrictions, have confidence the UK will continue along the government’s roadmap out of lockdown, despite growing concerns over the Delta strain of the virus.
“While this is a much-needed dose of positive news as we head into the summer, rising inflation serves as a sobering reminder of the challenges that remain on the horizon.”
The BDO findings echo a recent survey of Scottish businesses by chartered accountancy body ICAEW that found optimism had improved markedly.
The business monitor found that domestic sales were expected to grow at their fastest rate since the survey began in 2004, while the rate of export growth was anticipated to outpace the rest of the UK over the coming year.
As revenues recover, Scottish businesses expect to begin hiring again after reducing their headcounts by a collective 0.7 per cent last year, with the furlough scheme likely to have protected jobs.