The impact of the global pandemic caused UK business output to fall to its lowest level on record in 2020, despite a raft of support measures taken by the chancellor throughout the year, according to the latest Business Trends report from accountancy and business advisory firm BDO.
The BDO Output Index, which provides the most comprehensive snapshot of business output by weighting macroeconomic data from the UK’s main business surveys, averaged 73.62 in 2020. This figure is significantly lower than any other year since the index began in January 2005. Previously, the lowest annual average had been 83.28, which was recorded during the Great Recession in 2009.
Despite the end of the second national lockdown in early December, a return to the tier system failed to significantly increase business output. BDO’s Output Index increased by only 0.07 points during December, leaving the index at 69.13 points – well below the 95-mark which indicates output growth. BDO’s Output Index increased by six times this pace (0.43 points) in December 2019. The weak December figures are particularly concerning given the importance of the Christmas period for millions of UK businesses.
Elsewhere in the report, the BDO Optimism Index rose by 0.26 points in December to reach 86.96. This came as the second national lockdown restrictions were temporarily lifted, and as the UK began the rollout of COVID-19 vaccinations on 7th December, which represented the first definitive source of light at the end of the tunnel for businesses. Following the introduction of a third nationwide lockdown this month, this increase in sentiment is expected to be short-lived.
The report also found that the rate of UK employment continued its downward trajectory for a second consecutive month in December, declining by 0.59 points to 108.15. The latest data suggest that the slow but steady trickle of job losses continued at the end of the year, with the latest lockdown likely to place further pressure on the BDO Employment Index in the months ahead.
Commenting on the results, Steve Le Bas, Partner at BDO LLP in Southampton, said: “These figures reinforce just how stark the economic impact of the pandemic has been. As we enter a third national lockdown, crippling challenges will continue to plague businesses in the weeks and months ahead. Successful and rapid roll-out of COVID-19 vaccines will be the single biggest driver of business recovery.”