BDO’s Employment Index has reached a 30-month high, as hiring expectations catch up with improving UK business confidence, according to the latest Business Trends report by accountants and business advisers BDO LLP.

 

The BDO Employment Index, which measures UK businesses’ hiring intentions over the next two quarters, reached 99.4 in December, up from 98.3 in November. The index has now been at or above the crucial 95.0 level that indicates employment growth for 12 months and is almost at the 100.0 mark which points to employment increasing at its long-term rate, suggesting that employment is gaining pace with wider economic recovery.

 

In line with this, business confidence showed similar improvement. BDO’s Optimism Index, which predicts business performance two quarters ahead, reached 103.4 in December, up from 103.1 in November. This is marginally below the index’s highest score in Business Trends’ 22-year history and is comfortably above the all-important 100.0 mark.

 

Buoyant readings for both the services and manufacturing sectors indicate that sustained economic growth is likely in the UK during the first half of 2014. In the dominant services sector, which accounts for roughly three quarters of the UK economy, new orders and clients’ willingness to commit to contracts lifted optimism to 100.7 in December, up from 100.4 in November. The manufacturing confidence sub-index reached 115.5, up from 115.3, close to its all-time high.

 

This positive outlook is underpinned by continuing improvement in business conditions as the Output Index, which predicts short-run turnover expectations, increased to 102.5 in December, up from 101.8 in the previous month. The manufacturing sub-index rose from 108.1 in November to 109.8 this month, its peak since April 2011, while the sub-index for the  services sector rose for the seventh consecutive month to reach 100.8, up from 100.4.

 

Inflationary pressures on UK businesses continued to ease in December, creating a more benign operating environment, as the BDO Inflation Index declined for the seventh consecutive month to 98.7 from 99.7 in November. Total wages continued to grow by less than the annual rate of consumer price inflation, meaning real wages are falling, while the cost of Brent Crude oil fell 0.1% in sterling terms over the year to December, helping manufacturers control costs.

 

For full report please see BDO’s website.