Business output falls to four-year low

Services output drops to lowest level since June 2013

UK business output has fallen to a four-year low, according to the latest Business Trends Report by accountants and business advisers BDO LLP.

The new report reveals that BDO’s Output Index – which indicates how businesses expect their order books to develop over the next three months – has fallen to 95.6 in April from 95.9 in March, the lowest level in four years. It is now well below the long-term growth trend of 100 and is only just above the point of contraction, below 95.0.

The slowing services sector, which makes up the majority of the UK economy, is primarily responsible for the gloomy output figures. BDO’s Output Index for the services sector has fallen to 95.3 from 95.7 the previous month. 

In April last year, the Services Output Index was sitting at 100.4, which is above the long-term growth trend. While the sector’s growth was shrinking before the vote to leave the European Union, its waning performance has been more pronounced since the Brexit decision. Consumer-focused services – such as retail – have been the hardest hit by the recent squeeze on household disposable incomes.

Commenting on the findings, Peter Hemington, partner, BDO LLP, said: 

“There appears to be growing disconnect between what businesses are experiencing now and how they expect their order books to develop in the coming six months. Current output levels are very close to a zero-growth level, yet UK business people are strongly optimistic. This would suggest that we could be in line for a significant growth surge in early 2018.