South: BDO warns of difficult winter for businesses

Both business output and confidence fell in October for the first time since the initial lockdown in April, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

The BDO Output Index, which provides the most comprehensive snapshot of business output by weighting macroeconomic data from the UK’s main business surveys, fell by 0.86 points in October, putting an end to five consecutive months of recovery.

The latest figures show that regional lockdowns and a tightening of national restrictions had already started to take their toll on business output across the UK – and point to an even more difficult month ahead as the second nationwide lockdown commences. Overall, BDO’s Output Index now stands at 77.09, well below the 95 level that indicates annual output growth.

The decline was driven by falls in both the services and manufacturing sectors, which fell by 0.82 points and 1.18 points respectively. Travel restrictions and the 10pm curfew imposed on pubs and restaurants have weighed particularly heavily on the BDO Services Output Index, which now stands at just 75.49 points.

The first decline in five months for BDO’s Optimism Index – which decreased 0.37 points to 88.94 in October – also suggests businesses are worried about a difficult winter, with fears of an extended lockdown in the run-up to Christmas compounded by the prospect of a no-deal Brexit outcome.

Elsewhere in the report, the BDO Employment Index remained steady in October, rising by 0.03 points to 109.49. The extension of the furlough scheme, which has provided an important buffer between the labour market and the wider economic slowdown, is expected to suppress any immediate spike in unemployment.

Commenting on the results, Malcolm Thixton, lead partner at BDO in Southampton, said: “The green shoots of recovery which started to emerge in May have been dealt a blow by the announcement of a second lockdown. While the extension of the furlough scheme is welcome news for employees in the immediate term, uncertainty looms over sustainable job security and fears of mass redundancies have merely been pushed back rather than solved.

“That said, with many businesses now adapted to life under lockdown, the second dip isn’t expected to be as deep as the first shock.”