Numbers Are Down, but Business Optimism Is Up

November 17, 2016

The economic climate in post-Brexit Britain was supposed to be harsh and unforgiving, but after several tumultuous and uncertain months, UK companies are finding the slump to be less severe than predicted. In fact, according to the latest business trends report from BDO, an international accountancy and services firm, business optimism has risen from 97.9 to 98.7—well above the 95.0 level, which would indicate negative growth. However, despite this growing optimism, the report revealed additional, less positive indices, which offered a more complete representation of the nation’s economic climate. These three indices are as follows:

  1. The output index, which reflects the amount of orders for goods and services that companies are receiving, has fallen from 98.2 in July to 97.4 in August.
  2. The inflation index, which measures the rate at which prices are increasing, has continued to rise, going from 99.9 in July to 101.4 in August.
  3. The employment index, which quantifies firms’ intentions to hire, held steady at 100.9 from July to August.

Yet, BDO is not the only organisation suggesting that this post-Brexit optimism may be slightly premature. Upon review of various key aspects of the UK economy, the British Chamber of Commerce (BCC) has changed its growth forecast for the remainder of 2016—reducing it from 2.2 per cent to 1.8 per cent. And, the organisation additionally reduced its growth estimate for 2017—lowering it from 2.3 per cent to only 1.0 per cent.

Unfortunately, there may still be discouraging economic effects from Brexit. In a different survey from the BCC, 1 in 10 UK companies have reported that their EU workers are planning to quit depending on how Brexit negotiations go.

For now, UK companies should continue to work toward bolstering their business, wait to see how Brexit negotiations shake out and stay confident.

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