The firm’s output index, which tracks current order books and indicates GDP growth over the next three months, has risen from 98.45 to 99.63 over the past month. This, BDO says, suggests the UK can expect GDP growth equivalent to its long-term trend of 2%.
The index rise, which is the first for seven months, is largely down to the services sector, which performed better on the back of an improving global economy and stronger consumer spending in the UK.
However, the manufacturing output sub index also performed well, continuing its rise above the long-term trend. The sector is still benefiting from high demand from overseas, partly thanks to the cheaper pound.
Another area that continues to perform well above the long-term trend is employment, which remains at record levels and looks set to stay that way for at least the first half of 2018.
But there are two issues that could create problems for UK businesses in the near future. The first is inflation. BDO’s inflation index has increased from 99.85 to 101.15, driven up up by rising input costs for businesses which will eventually get passed on to consumers later in the year.
The second is Brexit uncertainty. As BDO partner Peter Hemington pointed out, UK business may have made a strong start despite Brexit uncertainty but “if the government continues to stall on providing a clear Brexit strategy for businesses, the performance of UK firms will suffer”.
“We need the government to align quickly and communicate its Brexit plan,” he said. “It is crucial so that UK businesses can make informed investments to best prepare for the future.”
The BDO business trends report is compiled using data from more than 4,000 respondents from companies across a wide range of sectors employing some five million employees.