The approaching end of Covid restrictions on 19 July has propelled business confidence to its highest level on record, shows new research published today.
Accountancy firm BDO’s latest optimism index jumped to 112.45 in June, up from 109.71, to its highest level since the survey started in 2005.
The increase was the fifth consecutive month the index has risen, chiming with the timeline of the lifting of Covid restrictions during 2021.
Read more: UK economy grows 0.8 per cent in May
Kaley Crossthwaite, partner at BDO LLP, says: “Businesses are clearly looking forward to the lifting of restrictions on the 19th July.”
“The Summer spending surge that could follow will provide a huge boost to the economy, and businesses will be hopeful that the tide is turning over the long term.”
Figures published by the ONS last week showed the UK economy grew 0.8 per cent in May, slightly lower than economists expected.
Confidence improved the most among manufacturers, with BDO’s index for this industry surging to 113.22 from 102.98 in May. Hope that bottlenecks surfacing in global supply chains will ease in the coming months is likely driving confidence higher among manufacturers.
The figures also point to further gains in the UK labour market. The firm’s employment index edged up in June to reach a six-month high of 108.01. These figures mirror IHS Markit’s latest PMIs for the UK services and manufacturing, which show hiring activity is picking up quickly among firms in these sectors.
Inflation fears are mounting
BDO’s research shows concerns about inflationary pressures on businesses’ margins are mounting quickly.
The firm’s inflation index reached a four-year high of 103.83 in June, up from 102.51 in May.
Disruptions to global supply chains caused by factors such as Brexit and the blocking of the Suez Canal, combined with increased demand from households looking to spend savings accumulated during lockdown and higher wages due to labour shortages, have triggered shortages of goods and service.
This has put upward pressure on prices, BDO said.
“The hope is that factors pushing up inflation – shortages caused by supply chain disruption and increased demand caused by the lifting of lockdown restrictions – are short term. However, businesses should keep a close eye on this in case it becomes a longer-term prognosis” Crossthwaite added.