UK business output weakened in October as confidence fell for a third consecutive month, according to the latest Business Trends Report by accountants and business advisors BDO LLP.
The manufacturing sector was the worst hit by this malaise, with confidence plummeting to its lowest level since June 2017. October’s index reading found that manufacturing confidence slipped for a fourth consecutive month, declining by 1.82 points to 106.66, while manufacturing business output also dwindled from 103.26 to 102.74.
This marks a concerning turnaround for the sector, which was credited for propping up British business output last month amid stagnation in the services sector. Manufacturers are at the sharp end of a more general slowdown in global trade, as well as Brexit-induced reluctance from many European customers to source components from Britain for fear of supply chains collapsing in the event of a no deal.
Output growth in the services sector – which accounts for approximately 80% of the UK economy – remained unchanged from the previous month, standing at 97.08 points in October. However, this marks a 2.16 decline in year-on-year growth, while optimism within the sector has been on a gentle downward trajectory since July.
Commenting on the BDO Business Trends Report’s findings, Richard Rose, Head of Midlands at BDO LLP, said: “A lack of clarity on the shape of Britain’s future trading relationships has caused a general weakening of business optimism, but it is particularly concerning to see confidence in the manufacturing sector – which accounts for 8 per cent of all jobs in the UK – descend to a 16-month low.
“The Chancellor’s recent Budget announcement to increase the Annual Investment Allowance for two years will go some way to supporting small to medium sized businesses kick-start spending on fixed assets. However, finalising Brexit negotiations is the single most important action required to restore confidence in the British economy.”