Business confidence in the UK has reached a near two-year high, with the optimism of British firms at its highest level since just before the 2024 Autumn Budget. Advisory firm BDO reported that its business optimism index jumped to 94.22 in August, primarily fuelled by a strong rebound in confidence within the services sector.
The output of UK firms also grew, with BDO's output index rising to 98.37 last month, marking its highest level since January 2025. The services sector was the main contributor to this growth, showing resilient activity despite inflation concerns linked to the Iran war. The UK's travel and leisure industries benefited from strong seasonal demand, although weak export demand for services impacted the overall output index.
BDO's index of employment levels remained broadly stable at 93.10, showing a slight increase from a recent 15-year low. While hiring remains subdued, the rate of job losses is slowing, suggesting a stabilisation in the jobs market from its recent lows.
Analysts at BDO indicated that these figures are positive for the government ahead of the upcoming October Budget. However, they cautioned that this could be undermined if Chancellor John Healey does not address the increasing costs faced by British firms. The British Chambers of Commerce has urged the government to tackle the 'cost of doing business', noting that average firm overheads have risen by 70 per cent over the last decade. Hospitality and retail businesses have specifically called on Healey to ease employment costs and reform the business rates system.