Mon, 11 Jul 2012

The Eurozone crisis has cast a dark shadow over longer-term growth prospects, but the UK’s short-term confidence has improved to a 12-month high, according to the latest Business Trends report by accountants and business advisers BDO.

BDO’s Output Index, which reflects the current experience of UK business people and therefore predicts GDP one quarter ahead, climbed to 96.7 in May from 95.8 in April, the third consecutive month that the index has climbed above the 95.0 mark that indicates growth.

This suggests that the UK will experience growth from the middle of 2012, while its Optimism Index has dropped for the third consecutive month, from a peak of 98.0 in February to 95.5 in May, which suggests growth will tail off in late 2012.

The firm’s Employment Index has also declined, to 94.9 from 95.5 previously. Its return to below the 95 level points to continued weakness in the labour market, indicating that employment may fall in 2012.

BDO partner Peter Hemington says: “Given that half the UK’s export goods go to the Eurozone, it’s hardly surprising that the ongoing turbulence there is denting longer-term growth prospects here.

"The government's plans to shrink current spending by the State remain a necessity, but a fantastic opportunity is being missed to build high-quality infrastructure cheaply, taking advantage of the very low borrowing rates that the government can source currently. More energy and imagination than we have seen so far is required to access this opportunity, with the key additional benefit this would bring in terms of stimulating growth and employment. More of both are sorely needed at the moment.”