BDO report gives mixed messages for SMEs

Accountancy firm BDO has delivered two pieces of news for SMEs and the wider business world today – one is generally positive, the other somewhat more gloomy

BDO report gives mixed messages for SMEs

Starting with the good news; BDO’s Employment Index has hit a 19-month high of 96.0, suggesting that private sector firms intend to hire more staff over the next six months.

This is the third consecutive month that the index has scored above the crucial 95.0 level that indicates employment growth, and the highest it has been since August 2011.

In spite of this however, UK businesses still do not anticipate economic growth in the next two quarters.

BDO’s Output and Optimism indices – which predict short-run turnover expectations and business performance a quarter and two quarters ahead – sit at just 93.0 and 92.2 respectively. Given that 95.0 is the level that indicates growth, BDO predicts that economic conditions will remain tough until at least mid-2013 – talk about lulling us into a false sense of security.

More encouragingly though, and as reported last week, service sector confidence moved up substantially this month, with BDO stats showing that optimism has increased to 93.2 (from 89.6 in February) and output up to 93.2 from 91.5 last month. 

Whilst still below the magic 95.0 mark, let it not be forgotten that the services sector makes up roughly three quarters of the UK economy, and optimism in the sector is now at its highest point since October 2012.

But, as much as we wanted to end on a high, it is probably worth adding that the manufacturing sector’s data has continued to decline, with optimism plummeting from 94.5 in February to 88.2 this month. The BDO Output Index also fell, from a reading of 94.1 to 92.4. 

BDO believes the depreciating value of Sterling coupled with weak demand from domestic consumers and struggling Eurozone import partners could be weighing on manufacturers’ confidence. 

Peter Hemington, partner at BDO, said: “It is encouraging to see improvement in UK businesses’ hiring intentions, particularly in light of the imminent public sector payroll cuts which will add pressure to the unemployment rate.

“However, the plunging confidence of manufacturers is a particular cause for concern. It was disappointing to see little action taken in last month’s budget to help this beleaguered sector. “

It could be a while yet before we can give you an all-round optimistic outlook –  but we know that won’t dissuade the nation’s entrepreneurs from getting stuck in and going for growth. On your marks, get set…’  

Adam Pescod
Adam Pescod

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