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BDO Optimism Index reaches its highest level since 2005
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BDO Employment Index reaches 6 month high as businesses hire staff ahead of a full reopening
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Rising inflation is a growing concern as the Index edges towards a four-year high driven by supply chain disruption and increased demand for goods and services
Business confidence jumped in June to its highest point since 2005, as businesses look ahead to the lifting of lockdown restrictions later this month, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.
The BDO Optimism Index moved 2.74 points from 109.71 in May to 112.45 in June, marking the fifth consecutive month of growth and its highest point since records began in 2005. The index now stands well above the average level of 100.
The rise was driven by the Manufacturing Optimism Index, which rose from 102.98 to 113.22 in June. This reflects an improved global economic outlook, as the effects of the vaccine rollout begin to be felt by economies across the globe.
The rise in the Services Optimism Index was more muted this month, increasing by 1.79 points to 112.35. Given the index includes restaurants, cinemas, and the wider hospitality industry, the response reflects that little has changed for these businesses over the past month in terms of lockdown restrictions.
The BDO Employment Index also increased for the second consecutive month in June, reaching a six-month high of 108.01. This compares to a reading of 107.22 in May. As with the BDO Optimism Index, the increase was largely driven by the gradual reopening over the last few months and the anticipation of further lifting of restrictions.
Despite this optimism, the BDO 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 driven prices higher.
Commenting on the results, Phil Hall, partner at BDO in East Anglia, said: “Businesses have clearly been looking forward to the lifting of restrictions in July with optimism at the highest level since our Business Trends Index began in 2005. To cast your mind back, 2005 was the year London won the right to host the 2012 Olympics, Daniel Craig was confirmed as the next 007 and Jamie Oliver campaigned against Turkey Twizzlers. A lot has changed since then and never more so than in the past 12 months.
“After a grueling year of unpredictable changes for businesses, rising COVID-19 cases still leave an element of uncertainty and cause for concern. The Summer spending surge that could follow reopening will provide a boost to the economy, and businesses will be hopeful that the tide is turning over the long term.
“While businesses are feeling optimistic, rising inflation may be a sting in the tail. 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.”