Business activity rebounds but Budget nerves could damage growth
UK private sector activity marked its largest monthly rise of the year in October, but momentum could be shattered by increasing Budget speculation.
According to the latest business trends report from accountancy firm BDO, which measures businesses turnover and economic activity, output rose to 97.49 past month, up from 96.25 in September.
This marked the largest monthly improvement since December 2024, when the UK economy grew off the back of strong consumer activity during the festive period.
The October rise was credited to contributions from the services sector after easing cost pressures and lower than expected inflation drove consumer demand, and a rebound in manufacturing activity.
In particular, manufacturing business output rose to 94.14 from 92.64, its largest jump since April.
The sector was also helped by clarity from trade deals with India and the US as well as the resumption of Jaguar Land Rover operations following damaging cyber attacks earlier this year.
Subdued growth confidence
Despite optimism among manufacturers ticking higher, expectations of subdued growth and ongoing policy uncertainty surrounding the Autumn Budget has knocked business sentiment.
Scott Knight, head of growth at BDO, said: “Businesses remain stuck in wait mode as nerves around the Autumn Budget weigh on confidence.
“After what feels like months of kite flying to test opinion and policies, the UK’s businesses need clarity before they can confidently invest in meaningful opportunities for growth.”
Employment on the up
However, the firm’s employment index ended its five month long downward spiral, edging up to 93.95, marking the first improvements since earlier this year.
But, the unemployment rate rose to 4.8 per cent in the three months to August, underlining the continued fragility of the jobs market as businesses wait for certainty on tax rises.
UK companies have been shouldering a £20bn tax hike after national insurance and minimum wage contributions were increased in last year’s Budget and forced many to stop hiring new staff or close their doors.
Owners now fear business rates could also spike on 26 November.
Knight said: “With the right signals from the Government, businesses can confidently move forward, but for now the mood music remains subdued.”