BDO: Business output and optimism fall ahead of Brexit vote
Business outputs and optimism about future growth have fallen as companies are uncertain of the current economic direction in Scotland, according to the latest “Business Trends Report” by accountants and business advisers BDO LLP.
The situation is matched across the UK with businesses stating they think the economy is not going anywhere while the referendum result remains unknown.
This month’s report reveals that uncertainty ahead of the decision about our EU membership has cast a shadow over the economy with growth expectations amongst businesses falling for the tenth month in a row.
BDO’s Output Index – which reflects companies’ experience of orders on hand – now sits at 99.7 which is 0.9 down on last month and 4.8 lower than May 2015. This is the first time since 2013 that it has fallen below the 100 level that indicates long-term trend growth at about two per cent.
The uncertainty around the EU decision is also contributing to a slowdown in job creation. BDO’s Employment Index – which shows firms’ intentions to hire – has dropped to 101.2 which is 1.0 lower than last month but a sizeable 10.1 less than the same month last year.
Martin Gill, head of BDO LLP in Scotland, said: “These figures highlight the dilemma company’s face at the moment. Uncertainty - both about the EU referendum but also wider economic concerns - has contributed to businesses’ expectation that economic growth will fall behind its long term trend for the first time in nearly three years.
“There have been reports of subdued activity in the construction sector, in manufacturing, and obviously in the oil and gas sector. These are three very important contributors to the Scottish and wider UK economy and all three reporting reduced activity is a concern. A reduction in output and optimism cannot just be put down to uncertainty due to the EU referendum and may have some more deep rooted causes.
“We need to see greater investment and higher productivity to improve capacity, encourage growth and ultimately drive up living standards. If businesses don’t foresee growth and a more optimistic outlook in the next few months then we could be in for a bumpy ride this autumn.”