UK business output growth declines for first time in 2019

– Diminishing stockpiling activity leads to drop in manufacturing output –

– Manufacturing optimism falls to 30-month low –

– Services sector optimism on the brink of negative territory –

A new report from accountants and business advisors BDO LLP has found that UK business output growth has declined for the first time this year. BDO’s Output Index, which measures UK business output growth, fell to 98.63 in April from 98.74 in March.

Business confidence also registered another decline in April, slipping by 0.36 points to 95.74 – the lowest level the index has been since 2012.

As the imminent threat of a no-deal Brexit was lifted last month, activity in the manufacturing sector is expected to  diminish due to unprecedented levels of stockpiling tailing off. BDO’s Manufacturing Output Index, which tracks output growth in the sector, declined to 97.27 in April. This marks a year-on-year decrease of 8.32 points and compares to its most recent high of 103.26 in September 2018.

In further gloomy news for the manufacturing industry, confidence has hit a 30-month low. BDO’s Manufacturing Optimism Index, which shows how businesses expect output to develop in the next three to six months, declined to 101.09 in April from 103.73 in March. The index has not been this low since November 2016 and reflects concerns by manufacturers that they expect growth to moderate in the coming months.

Optimism in the UK’s services sector fell for a ninth consecutive month after it plummeted by 4.15 points in March. The index shows that optimism dropped to 95.06, just 0.06 points off negative territory. Despite the extension of Article 50 until October, businesses still don’t have the clarity they desperately need on the future long-term relationship the UK will have with the EU.

Commenting on the BDO Business Trends Report’s findings, Ed Dwan, partner at BDO LLP in the North West, said:

“The only certainty businesses have at the moment is that the UK government still doesn’t know exactly how or when the UK will leave the European Union. We are seeing the impact of this confusion with business confidence plummeting.

“Although confidence has hit a 30-month low in our Manufacturing Optimism Index, we are seeing real glimmers of positivity across the sector within our manufacturing clients in the region. Manufacturers that have committed to growth through innovation are forging ahead despite market conditions, which is even more impressive when you consider the dreary backdrop.

“Among businesses generally, an extension of Article 50 alone is insufficient to restore sentiment, so it was disappointing to hear the Chancellor’s plan to conduct a three-year spending review is now unlikely to go ahead given the political uncertainty. The Chancellor should not wait – a rethink of government spending priorities could provide the shot in the arm that the economy needs.”

To download BDO’s New Economy report and find out more visit www.neweconomy.bdo.co.uk