Member Article

UK business set to thrive into 2015 despite Eurozone deterioration

UK businesses are on track to see continued growth in the first half of 2015 despite the Eurozone’s stalling economic prospects, according to the latest report by accountants and business advisers BDO LLP.

The BDO Output Index, which tracks UK businesses’ order books, held steady at 103.2 in November.

This suggests that GDP growth over the next three months should be comfortably above the UK’s long term trend of 2.25%.

Despite UK businesses’ underlying strength, the BDO Optimism Index, which tracks how UK businesses expect orders to develop over the near term, fell from 104.6 in October to 103.9 in November.

This was largely driven by stalling growth in the Eurozone, the UK’s main trading partner, and demonstrates the UK’s vulnerability to faltering international growth.

BDO’s Inflation Index, which predicts businesses’ cost expectations over the next three months, fell for the seventh consecutive month to 95.8 in November.

This was reinforced by weak wage growth keeping cost inflation low for labour-intensive services firms and falling oil prices aiding manufacturers.

Echoing the upbeat outlook, BDO’s Employment Index, which records companies’ hiring intentions over the next three months, rose to 113.9 in November from 113.4 in October. This is the fifteenth consecutive monthly rise in the Employment Index and puts it at a new record high as we head towards 2015.

Peter Hemington, partner, BDO LLP, said: “Despite the gloomy and deteriorating Eurozone economy, UK businesses are successfully weathering the storm and are on course to enter 2015 on the front foot, sustained by solid and continued growth.

“However, delve a little deeper and one developing trend poses cause for concern. Despite UK employment levels being on the up, income tax receipts for the year have been lower than expected.

“This suggests that the quality of jobs being created is low, while much is being made of job creation as evidence of economic policy success.

With UK government borrowing continuing to be very cheap and “red lights flashing” in the world economy, we think that the government should do more in terms of investment in infrastructure to create well paid jobs and keep the recovery surging onward.”

This was posted in Bdaily's Members' News section by Clare Burnett .