Business optimism on the rise despite uncertain outlook

Business confidence is gaining momentum on the back of an 'upbeat' outlook for the UK economy, a key survey indicated today.

The upturn in confidence reflects sharp improvements in the manufacturing and services sectors. Picture: John Devlin
The upturn in confidence reflects sharp improvements in the manufacturing and services sectors. Picture: John Devlin

Accountant and business adviser BDO said its optimism index, which indicates how firms expect their order books to develop in the next six months, increased from 98 to 102.2 in December, putting it above its long-term trend.

The firm said the result showed that businesses remained “resilient” following the Brexit referendum result, the declining value of sterling and volatility within the global economy.

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The upturn in confidence reflected a sharp improvement in both the manufacturing and services sectors which gained momentum towards the close of 2016. UK car production saw the strongest November in 17 years.

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BDO noted that the four-point-plus increase in optimism was the sharpest observed since 2009, suggesting that businesses are as confident as they were in September 2015. The cheaper pound has made UK exports more price competitive, contributing towards the upbeat mood.

Martin Gill, head of BDO in Scotland, said: “British businesses are feeling pretty confident at the moment, helped by the impact of the currency depreciation on export competitiveness.

“There’s also a feeling out there that the world economy is picking up again as we go into 2017. Brexit may mean gloomy news in the press and, at times, chaos in government. But our business community is getting on with it on the basis that opportunities for growth are there to be grabbed.”

He added: “One bright spot is the way in which the government has reached out to UK business in developing its Brexit strategy – a more pragmatic agenda seems to be emerging as a result.

“We also encourage the Chancellor and the Bank of England to be highly proactive in their policy responses if EU related jitters are seen in the coming months.”

The report follows a raft of generally positive economic surveys in recent weeks alongside a stock market bounce that has seen the FTSE-100 index push well above the 7,000 mark.

Meanwhile, a study by the manufacturers’ organisation the EEF, also released today, finds that half of manufacturing firms are braced for a decline in economic conditions this year although they still expect to increase sales.

The EEF found grounds for optimism for jobs and investment despite the continued uncertainty of the impact of Brexit.

A survey of almost 300 company executives revealed that half see more risks than opportunities in 2017. EEF said the results showed that companies felt “quietly confident” about the year ahead.

Terry Scuoler, chief executive of the EEF, said: “Firms are strongly attuned to the challenges and remain fully focused and determined to deliver on their long-term plans for growth.”