UK services sector ‘driving force’ behind growth, BDO says
The UK’s services sector is the “driving force” behind marginal growth gains, research by the consultancy BDO has suggested, as other sectors’ performance has become increasingly lacklustre.
Chancellor Rachel Reeves has been urged to ease cost pressures on firms as her £25bn national insurance tax hikes, coming into effect this week, have weighed down on business confidence.
But one area of the economy has remained resilient amid strong economic headwinds, according to BDO’s Output Index.
Services drove an increase in output in March, according to what the BDO describes as the “poll of polls” as it considers data from various sources including S&P Global, the OECD and the British Chamber of Commerce.
It is the first time the BDO’s index has recorded an increase in business output this year.
The output index rose by just under one percentage point to 97.75. The index describes any figure above 95 as “positive”.
Kaley Crossthwaite, a partner at BDO, said that services were the “driving force behind the UK’s growth agenda” as she called for Reeves to introduce measures that enhance their expansion.
“To invest, expand and continue playing their part, they need targeted policies that strengthen the UK’s position in international markets and ensure businesses can deliver on their ambitions,” Crossthwaite said.
The picture for manufacturers is quite the opposite to services.
BDO’s index for manufacturing dropped to its lowest reading since December 2022, driven by fears of what President Trump would do on trade policy.
Difficulties are likely to intensify further for UK exporters after Trump imposed sweeping ten per cent tariffs on UK goods.
The survey also showed a slight increase in business confidence following a four-year low in February.
But firms have continued to scale down hiring plans as its employment index remained “subdued” after February saw the worst figure in 12 years.
Reeves’ £25bn national insurance tax grab has been cited as businesses’ main concern in various surveys, putting the Chancellor’s hopes for growth under risk.