Optimism among UK businesses has fallen to a 20-year low, with the latest survey predicting the economy will still be contracting at the start of 2013.
Accountancy firm BDO said its Optimism Index has hit depths not seen since it began in 1992. The index, which tries to predict business performance two quarters ahead, fell to 89.1 in August, significantly below the 95 mark which would indicate a return to growth.
Neil Craig, head of BDO in Scotland, said business sentiment was “zigzagging” as a result of the wider economic problems, and the UK government needed to increase investment in order to drag the country out of recession.
“The government’s efforts to cut current spending may not be working out quite as planned, though we believe that the strategy in essence remains correct,” he said.
“But we have long been concerned that the cuts to investment spending were too drastic and that steps to redress this have been taken too slowly. We welcome signs that the government now wishes to boost its investment in UK infrastructure.”
BDO’s Output Index – which predicts short-run turnover expectations – has also fallen sharply to 90.8 in August, from 93.9 in July, reaching its lowest point for 40 months. Its Employment Index was also lower, suggesting the private sector is unwilling to create jobs in the current environment.
