Business optimism has “crashed” to its lowest level since September 2012, according to a new report from accountants and business advisors BDO.
BDO’s Optimism Index, which shows how businesses expect output to develop in the next three to six months, plummeted to 96.10 in March from 99.79 in February.
According to the firm, the report registers the “worst monthly drop” in the optimism index since November 2008, and added that, in “absolute terms”, sentiment is now weaker than its previous low point after the UK’s vote to leave the EU in 2016.
The services sector, which comprises around 80% of UK GDP, drove the overall decline in confidence with the sector index falling by 4.15 points to 95.13 in March. Despite the plunge in optimism, BDO’s Output Index, which measures UK business output growth, held steady at 98.74 in March, up 0.42 from 98.32 in February.
Peter Hemington, partner at BDO, said: “Continued uncertainty about Brexit has led to a severe worsening of expectations about our near economic future. What we’re now seeing is a sudden realisation that a no deal Brexit is both a real and imminent possibility.
“With optimism at levels last seen when we just avoided double dip recession in 2012, UK businesses expect a zero-growth economy as the backdrop to their plans. This matters, because worried businesses don’t hire or invest, creating the conditions for a marked downturn.”
He added: “Looking on the bright side, most businesses are not unhappy with current trading. If the fear of no deal can be lifted, we should hope for a quick return of confidence, and perhaps even a ‘no-deal averted’ bounce in the economy. Let’s hope our politicians can deliver this.”