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Business confidence at 13-month high 8 July 2013

Business confidence in the UK has reached its highest levels since May 2012, according to new figures.

BDO’s Optimism Index, which predicts business performance two quarters ahead, shows five consecutive months of improvement, from 93.6 to 94.4.

Optimism within the services sector, which makes up roughly three quarters of the UK economy, moved up to 95.5 this month – above the crucial 95.0 mark that indicates growth.

Peter Hemmington, partner at BDO, said: “While it’s encouraging to see confidence continuing to improve, we should be mindful of the zig-zag trend that has characterised UK business confidence since 2008.”

BDO’s Output Index, which predicts short-run turnover expectations, increased for the fourth consecutive month to 94.9 in June from 94.4 in May.

Manufacturers moved up significantly by 2.0 points to 95.7 this month – above the 95.0 level.

However, despite the extended period of growth, both optimist and output indices remain subdued, below the 95.0 level. External pressures – such as Eurozone volatility and lower consumer spending – are “likely to be weighing on UK businesses’ minds.”

Hemmington explained: “Periods of improved confidence have ended before growth has really begun to get going. On the last couple of occasions, this has been because of the crises in the Eurozone.

“This time, the worry is that financial market turmoil arising from the actions of the Federal Reserve will choke off yet another nascent UK recovery. As a result, the new Governor of the Bank of England perhaps has an even more interesting set of challenges to face than he might have expected.”

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