Services sector drives bounce-back in UK output amid global uncertainty
Services sector drives bounce-back in UK output amid global uncertainty
- Services sector drives first rise in BDO’s Output Index in 2025
- Hiring intentions remain at decade-level lows as economic and political uncertainty persist
In a glimmer of hope for the UK economy, strong output in services drove the first increase in business output this year in March despite serious headwinds weighing on confidence and hiring, according to the latest Business Trends report from accounting and business advisory firm, BDO.
The Output Index crept upward by 0.91 points to 97.75, as a recovery in the services sector offset a contraction in manufacturing activity.
Lower international demand for goods saw the Manufacturing Output Index fall to 88.39, its lowest reading since December 2022. This was driven by global uncertainty prior to the final announcement of the US tariff review on 2nd April, which has been confirmed to impact UK manufacturers, following the introduction of a 10% tariff.
Resilient domestic and international sales pushed services output up to 98.93 from 97.71 in February. The financial services sector was a notable contributor to the overall improvement. Better weather in March is likely to have partially offset a challenging month for consumer-facing sectors, such as retail, hospitality and leisure, as stretched household budgets weighed on demand conditions.
Business confidence and hiring intentions remain weak
Business confidence also rebounded slightly in March to 91.43, following a four-year low the previous month. However, the Optimism Index is still well below historic averages and lingering at levels last seen towards the end of 2022 – a period of high inflation and political uncertainty.
Continued political and economic uncertainty also kept hiring intentions subdued in March, after the Employment Index registered a 12-year low of 94.30 in February. The Index rose incrementally to 94.32 last month, but remained at historic lows last seen over a decade ago around 2013, when the labour market was recovering from the impact of the Global Financial Crisis.
Kaley Crossthwaite, Partner at BDO, said: “While last month’s Spring Statement provided welcome support for certain sectors, businesses across the economy are navigating turbulent headwinds in shifting trade conditions and rising costs.
“We know these businesses are the driving force behind the UK’s growth agenda. To invest, expand and continue playing their part, they need targeted policies that strengthen the UK’s position in international markets and ensure businesses can deliver on their ambitions.”
ENDSOverview of the BDO indices
An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison. 100 = average value. Above 95 = positive.
BDO’s Business Trends is a ‘poll of polls’ and comprises multiple surveys covering 4,000 respondents. Further information on outputs is available on request, but please note the Labour Force Survey is not one of them.
|
March 2025 (Figures for this report) |
Feburary 2025 | January 2025 | December 2024 | |
|---|---|---|---|---|
|
BDO Optimism Index |
91.43 | 91.40 | 92.20 | 93.41 |
|
BDO Output Index |
97.75 | 96.84 | 97.23 | 98.38 |
|
BDO Inflation Index |
97.45 | 97.94 | 97.08 | 96.86 |
|
BDO Employment Index |
94.32 | 94.30 | 94.72 | 95.14 |
Note to editors
BDO LLP operates in 18 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to mid-sized, entrepreneurially-spirited, high-growth businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.
BDO LLP is the UK member firm of the BDO international network.
BDO’s global network The BDO global network provides business advisory services in 166 countries and territories, with more than 119,000 people working out of 1,800 offices worldwide. It has revenues of US$15bn.
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