• 14/07/2020

Business output shows signs of recovery in June as lockdown lifts

Business output across UK services and manufacturing increased significantly in June as both sectors benefited from the continued lifting of lockdown restrictions, according to figures from the latest BDO Business Trends report.

BDO’s Services Output Index, which provides the most comprehensive snapshot of output in the services sector by weighting macroeconomic data from the UK’s main business surveys, rose by 11.20 points to 64.73 in June, its largest increase on record, as businesses felt the benefit of being allowed to reopen from 15 June.

The rise in services output – which encompasses a range of industries including retail, hospitality, transport and professional services – mirrors the jump seen in May’s Manufacturing Index when many employers in the sector were given the green light to re-start work. Output across the manufacturing industry continued this upward trajectory in June, with the Index increasing from 69.55 to 80.47.

Overall, BDO’s Output Index rose by 11.16 points to 66.50 in June, still well short of the 95 level that represents positive growth, and significantly below the lowest point of the 2008/2009 financial crisis, which hit a low of 79.28 in April 2009.

BDO’s Employment Index also continued its downward trend throughout June, dropping 1.87 points and taking the Index to its lowest level since January 2016. This fall represents the fourth consecutive month of decline, a trend likely to continue as Government support is rolled back further.

A similarly gloomy picture emerges from BDO’s forward-looking Optimism Index, which at 79.59 remains below its lowest point of 79.64 during the 2008/09 credit crunch, despite a second consecutive month of improvement.

Kaley Crossthwaite, Partner at BDO LLP, said: “Although economic activity remains considerably suppressed, the recovery in output is an encouraging signal that the easing of restrictions has breathed life into certain sectors.

“While output continues to show positive momentum, the crucial infrastructure underpinning the economy remains fragile. As government support measures are rolled back in the coming months, the prospects for the economy will become clearer. For now at least, there is reason for some very cautious optimism.”

Source: East Midlands Business Link