Business confidence in the UK has reached its lowest level in five years, with firms reporting activity to be at its lowest since the COVID-19 lockdown period of February 2021. A report released by accountants BDO shows a sharp decline in business activity last month, indicating that a brief rebound earlier in the year has lost momentum.
The BDO output index dropped from 94.8 in May to 91.53 in June. This downturn is attributed to a combination of factors including increased taxes, rising wage costs, and regulatory burdens. The ongoing impact of international events, such as the war in Iran, is also cited as a contributing factor weighing on the economy.
According to the BDO report, the subdued business confidence is likely to keep the job market stagnant. Scott Knight of BDO emphasized the immediate need for the incoming Prime Minister, Andy Burnham, to focus on rebuilding confidence. Burnham is slated to succeed Sir Keir Starmer as the leader of the country.
The economic environment suggests that companies are operating in a state of 'survival mode,' a stark contrast to previous periods of growth. The sustained low confidence levels present a significant challenge for the new administration as it seeks to stimulate economic recovery and encourage business investment. The report highlights that until confidence begins to rebound, the employment outlook will remain uncertain.