Confidence among UK businesses tumbled to its lowest level in over seven years last month, according to a new report, as yet more political uncertainty cast gloom over the economy.
Businesses in Britain’s manufacturing sector were the most pessimistic. Manufacturers are now facing “recessionary conditions,” the latest optimism index from accountants BDO said today.
The optimism index – a gauge of how companies are feeling about the economy – fell 0.67 points to 95.59 in October, just above the 95 level which indicates zero growth.
The fall was driven by a steep fall of 3.38 points in the manufacturing sector. Output in the sector also suffered, falling for a thirteenth consecutive month to hit 87.10 points. BDO said the score was “well into recessional territory”.
British growth has slowed considerably in 2019, but looks set to avoid a recession despite the economy contracting in the second quarter.
Manufacturing has borne the brunt of the slowdown, with weak global demand and ongoing Brexit uncertainty taking its toll on business investment, orders and exports.
Despite Prime Minister Boris Johnson striking a Brexit deal with the European Union in October, the upcoming General Election means uncertainty is set to linger over the economy for the time being.
BDO partner Peter Hemington said: “The last time we saw business confidence at such a low level was when the country was staggering out of the doldrums caused by the global financial crisis.
“With an unpredictable general election looming, continued political volatility in the UK remains a key driver of falling optimism.”
Dwindling confidence in the economy was accompanied by a fall in business output in October, BDO said.
Worryingly, not only the manufacturing sector but also the UK’s giant services sector registered a fall in output on BDO’s gauge.
Hemington said things did not look likely to pick up soon. “Given British businesses are telling us that new hires and investment are hard to justify at the moment,” he said, “growth will continue to remain elusive until there is some kind of resolution of the Brexit conundrum.”
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