Business confidence hits two-year high ahead of Budget
Business confidence has risen to a near-two-year high as the output of UK firms grows despite the looming October Budget.
The optimism of British firms has reached its highest level since just before the 2024 Autumn Budget, according to advisory firm BDO.
Its business optimism index jumped to 94.22 in August, fuelled by a strong rebound in confidence within the services sector.
BDO’s output index rose to 98.37 last month, marking the highest level since January 2025. The services sector was the key driver behind output, too, as resilient activity supported growth despite the inflation fears caused by the Iran war.
The UK’s travel and leisure industries benefitted from strong seasonal demand, while weak export demand for services dragged on the headline output index.
The advisory firm’s index of employment levels remained broadly unchanged at 93.10, having inched higher than a recent 15-year low.
Hiring remains subdued in the UK economy but the rate of job losses is slowing, BDO found, suggesting that the jobs market is stabilising from its recent lows.
‘All eyes on’ Healey’s Budget
Analysts at the advisory firm said these readings are good news for the government ahead of next month’s Budget, but could be undone if Chancellor John Healey fails to address the rising costs faced by British firms.
The British Chambers of Commerce, a top City body, has urged the government to address the ‘cost of doing business’. The average firm’s overheads have risen by 70 per cent in the last decade, it has found.
A group of City grandees, including Lord Stuart Rose and John Caudwell, have backed a campaign calling on the government to stop the “creep of taxes” weighing on British firms.
Hospitality and retail businesses have urged Healey to ease the cost of employment and reform the business rates system, which they say is pushing high street businesses to the wall.
Scott Knight, BDO’s head of growth, said: “With output on the up, it’s no wonder businesses are starting to feel a little less gloomy. However, all eyes are on Burnham and the Autumn Budget.
“Practical measures to reduce costs and unlock investment are essential if the Government is to turn sentiment into meaningful growth.”