The UK economy is set to stagger to the end of 2018 after business output in November fell to its lowest level since July, while business confidence slumped for a fourth consecutive quarter to its lowest level since January 2017, according to the latest Business Trends Report by accountants and business advisors BDO LLP.
November’s fall in business output was largely driven by the manufacturing sector. BDO’s Manufacturing Output Index, which measures UK output in the sector, showed that output dropped by 2.13 points to 100.61. Meanwhile, the services sector edged up marginally by 0.24 points to 97.32, but growth remains sluggish and well below its long-run average.
The decline in output in the manufacturing sector comes as its recent resurgence in Q3 proved to be short lived. The outlook for manufacturers could become bleaker still, as it is likely that the sector received an artificial boost from stockpiling activities linked to Brexit. Manufacturers could see a further decline in output as firms draw down on their accumulated inventories.
A rejection of Prime Minister May’s deal by Parliament tomorrow could see business confidence fall sharply. In November, BDO’s Optimism Index, which shows how firms expect their order books to develop in the next three to six months, fell to its lowest level since January 2017. With parallels to the Government’s three defeats in Parliament last week, confidence in the manufacturing sector fell to its lowest level since March 2017, when the House of Lords defeated the Government and voted for a meaningful vote on the Brexit deal.
Commenting on the BDO Business Trends Report’s findings, Malcolm Thixton, Lead Partner at BDO in Southampton, said:
“Declining output and falling confidence demonstrate that UK businesses have become disillusioned by the Government’s approach to ensuring that a business-friendly Brexit will be passed by Parliament.
“We are hopeful that Parliament will prevent the UK from sleepwalking towards a no-deal exit from the EU. Nonetheless, it remains vital that we find a clear resolution urgently so that businesses can begin to make preparations for Britain’s future trading relationships.”