Economic sentiment improves

THE first quarters of next year will bring no relief from the UK’s economic slowdown, according to a business trends report released today by accountancy firm BDO.

But the report’s optimism index suggests that sentiment is in slightly better shape than it was during the summer – although it still forecasts a contraction in the economy over the next coupe of quarters. The October index comes in at 91.9, below the 95 mark that would suggest flat growth, but it is nonetheless marginally up from its September score of 91.6. And it is significantly above its low ebb between April and August.

BDO partner Peter Hemington said: “The slight increase is, we hope, a sign that the rot may have stopped.”

He added, however, that “we would urge caution”: the report’s output index fell under the break-even 95 mark for the first time since June 2009, coming to 93.8 in October, down from 95.9 in September.

A separate survey confirms the gloomy outlook into 2011: the Lloyds TSB corporate markets barometer shows that in October only 46 per cent of firms were more optimistic about the economy now than they were three months ago. 35 per cent said they were more pessimistic, giving an overall score of 11 per cent.

● BDO’s indices are compiled using all the major UK business surveys, covering 11,000 respondents in firms employing 5m people.

● The break-even point is 95. Below this score suggests expectation of a contraction.