Economy resilient heading into 2016 as business optimism picks up

13th October 2015

Businesses expect growth to continue into 2016 as business optimism increased for the first time in over six months, according to the latest Business Trends Report by accountants and business advisers BDO LLP in Yorkshire.

BDO's Optimism Index increased to 102.2 from 101.9 this month, the first uptick in confidence since February this year. This confidence is underpinned by continuing low inflation rates, which are helping manufacturers in particular. The BDO Inflation Index sits at 96.1 this month, showing that businesses expect input prices to rise slowly. BDO's Employment Index still sits at a high level (107.6) this month. Coupled with increasing wages, this suggests the consumer-led recovery is set to continue. But businesses and policy makers cannot afford to be complacent - the IMF last week warned that the risk of a global recession is still on the horizon. BDO is calling for a boost in government and business investment to protect growth against future global economic tremors. Commenting on the findings, Terry Jones, partner and head of BDO LLP in Yorkshire, said: -The economy looks set for continued growth in the coming months, but this should not lead to complacency. -Policy makers must act to insulate the economy from the increasingly gloomy global economic outlook. So far our recovery has largely been based on consumer spending, but we need business and public sector investment if we are to rebalance the economy, boost productivity, and make sure that companies thrive in the region. This will put the economy on the firmest possible footing for the potentially shaky coming months. -Government has a vital part to play - speeding up infrastructure projects such as the electrification of the TransPennine Express would be an important boost. In addition, businesses should make sure that they are getting the best out their workforce by focusing on improving skills to help solve the productivity puzzle.