After months of rather muted performances across all indices, March saw the BDO Employment Index reach a 19-month high of 96.0 – the highest figure seen since August 2011. This is the third consecutive month the index has been above the crucial 95.0 level indicating employment growth, and suggests that hiring expectations of the private sector will help to offset the effects of expected public sector job cuts, providing a timely boost for both the economy and the nation’s sentiment as a whole.
Things aren’t rosy everywhere, however. Whilst the optimism index enjoyed a similar month-on-month rise to February (an increase of 1.6 to 92.2) it still remains below 95.0, indicating a pessimistic view of business performance for the next two quarters. The output index is seeing a similar story and, whilst it rose to 93.0 from the 92.1 last month, it still displays negativity amongst business owners for short-run turnover expectations.
However, confidence in the services sector has seen a distinct improvement this month: optimism rose to a five month high of 93.2, a significant increase on the poor reading of 89.6 in February. Output also rose to 93.2 from 91.5 last month. Whilst both readings still remain below 95.0, the increases are a welcome sign given the services sector accounts for around three-quarters of the UK economy.
Sadly, the positivity of the services sector has once again not been emulated within the manufacturing community. It seems the budget has done little to increase manufacturers’ confidence, with optimism seeing a huge fall from 94.5 in February to 88.2 this month. Output also fell from 94.1 to 92.4. The depreciating value of Sterling, weak domestic demand and struggling import partners in the Eurozone continues to weigh heavily on manufacturers’ confidence.
Overall, the improvement in UK businesses’ hiring intentions is definitely a positive sign for the economy, although the continued slide in manufacturers’ optimism is a major concern and demonstrates this month’s budget did little to restore confidence in this beleaguered sector. Two years ago, George Osborne trumpeted that the “march of the makers” would save the economy from crisis. This clearly has yet to be realised, and the sector remains sorely in need of further measures (such as temporary increases in capital allowances) to encourage businesses to invest and grow.
For more information and the full Business Trends report, please visit BDO’s website.