British firms’ optimism lifted by falling costs

Tim Wallace
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FALLING costs and increasing revenues are making UK firms more optimistic about their future prospects, according to a study out today from professional services group BDO.

Its optimism index edged up from 104.4 in January to 104.9 in February, which compares with 103.3 a year earlier.

And BDO’s output index increased from 102.9 to 103.1 on the month.

Part of the reason for the improvement is the fall in the inflation index from 95.1 to 94.7 – below the 95-level which indicates prices holding flat. And these combined factors have pushed up the employment index sharply, from 111.6 in January to 113.1 in February.

The steady optimism score indicates “that uncertainty around the General Election has not swayed confidence in continued growth over the next six months,” said the report.

And the combination means workers can expect a pay rise.

“These expectations are reflected more broadly in the falling UK unemployment rate and shrinking pool of unemployed workers, meaning that workers will start to benefit from real wage growth this year,” BDO said.