Business optimism and output growth across the UK fell in December, as firms contend with the effects of the Omicron Covid-19 variant, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.
The BDO Optimism Index slipped by 0.46 points to 103.81, driven largely by the emergence of the Omicron variant and the implementation of Plan B restrictions. It said the index now reflects a “more cautious outlook” from businesses as they enter the new year.
According to the firm, with supply chain challenges also likely to continue into 2022, it’s expected that optimism will at the very least stagnate over the next quarter, with the potential for significant downward pressures if further covid restrictions are introduced.
The Services Output Index has been the hardest hit, falling 3.2 points to 109.76 in December – the largest drop since August – as businesses contend with cancellations, staffing and supply chain issues.
Despite the difficult outlook faced by businesses, BDO’s said Employment Index crept up by 0.99 points in December to reach 109.08, the highest reading since before the pandemic in March 2020.
This peak highlights the current strength of the UK’s labour market as strong hiring intentions amongst employers are driven by competition for talent, particularly in the services and hospitality sectors. Employment levels have reached their highest reading since pre-covid in March 2020.
Kaley Crossthwaite, partner at BDO LLP, said: “Ongoing uncertainty around Omicron is providing a further blow to UK businesses which have already battled a string of supply chain issues, the threat of further covid restrictions and inflationary pressures this past year.
“While the health of the jobs market continues to be a glimmer of hope for employees and the Government, it also demonstrates the difficulties that businesses are having recruiting and retaining staff.”