EU referendum, slowdown in China, volatility in global markets and turmoil in the Middle East to rock UK growth in 2016 - BDO report

Freya Wood
Protestors take part in a demonstration
The impending EU referendum is fuelling uncertainty for UK businesses (Source: Getty)

Global economic fears and uncertainty over the EU referendum have pushed business confidence to a three-year low.

The economic slowdown in China, volatility in global markets and turmoil in the Middle East are all starting to take their toll on the previously resilient UK economy, accountancy firm BDO has warned this morning.

The impending EU referendum, expected as early as June, is also fuelling uncertainty for UK businesses looking at their long-term prospects.

“So far the government has done a good job in sheltering the UK economy from global storms but there is more that could be done,” Peter Hemington, partner at BDO, said.

“For instance, one small but helpful thing that the government could do would be to introduce a zero rate of VAT on companies that supply to exporters as currently happens in Ireland. This would boost UK manufacturing and encourage more trade abroad.”

BDO's Business Optimism Index, which predicts growth over the coming six months, has declined to 100.0.

This is the tipping point below which firms expect their output growth to drop under the long-term trend rate, and the falling optimism suggests GDP growth will drop below the long-term trend.

The indices are calculated by taking a weighted average of the results of the UK's main business surveys and incorporates the results of the quarterly CBI Industrial Trends Survey, the Bank of England's Agents' summary and the Market/CIPS Manufacturing and Services PMI Data.

BDO also identifies the poor performance of the UK's manufacturing sector, as weighing down the UK economy in the short-term.

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