Business confidence in the UK has plummeted to its lowest level in nearly two years, according to a new report from accounting and advisory firm BDO.
The firm’s latest business trends report highlights the sharpest month-on-month decline in sentiment since 2021, following the impact of the autumn Budget.
Mounting Pressures on UK Firms
The BDO optimism index dropped 5.81 points to 93.49 in November, marking its weakest reading since January 2023.
The decline reflects growing concerns among businesses about rising costs, reduced consumer confidence, and shrinking order volumes.
Confidence weakened across both the services and manufacturing sectors, with firms bracing for increased national insurance contributions and a higher minimum wage, as outlined in Chancellor Rachel Reeves’ recent Budget.
Additionally, businesses reported a fall in output in November, driven by subdued consumer spending, signalling a potential contraction in the broader economy.
Labour Market Challenges Persist
The report also revealed a reversal in employment trends. After showing growth for the first time in 15 months in October, BDO’s employment index declined again in November, reflecting ongoing difficulties in the labour market.
Calls for Targeted Government Support
Kaley Crossthwaite, a partner at BDO, described the decline in confidence as an unsurprising reflection of the challenges businesses face. She called for targeted government action to address the persistent issues of inflation and pricing pressures.
“December marks the end of a tough couple of years for businesses, and the drop in business confidence this month is not a surprise given the significant challenges they continue to face,” Crossthwaite said.
“While it’s encouraging to see businesses planning ahead and finding efficiencies to manage rising costs, meaningful growth in 2025 will only happen with targeted support from the Government. Policies that address the continued effects of inflation and pricing challenges are vital.”
Outlook for 2024 and Beyond
With confidence at its lowest ebb in two years, the report underscores the fragile state of the UK economy as firms grapple with inflation, rising operational costs, and weak consumer demand.
Business leaders and analysts alike are urging decisive policy interventions to stabilise the economic environment and lay the groundwork for recovery in 2025.
