Confidence dips as operating conditions threaten growth

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OPTIMISM among manufacturers dipped last month for the first time in 14 months, as challenging operating conditions threaten to slow confidence growth in the sector, according to a new report.

The latest Business Trends report by accountants and business advisers BDO in Yorkshire suggests that manufacturers are taking a more considered approach to potential challenges, such as rising operating costs, which could act as a drag on growth. The BDO Optimism Sub-Index for the manufacturing sector, which predicts growth expectations in six months’ time, fell from 121.0 in May to 119.5 in June, although it remains well above the 100 mark that indicates the long term growth trend.

In contrast, June’s Optimism Sub-Index for services firms rose from 101.1 to 101.9 in June. This renewed confidence made up for the slack left by manufacturers, as the services sector represents a larger part of the economy.

BDO said the combined outlooks led to an overall improvement in business confidence, with the BDO Optimism Index rising by 0.4 to reach 104.8 in June.

In addition, hiring intentions reached their highest level since the onset of the financial crisis in June.

Terry Jones, partner and head of BDO in Yorkshire, said: “Manufacturers are under growing pressure from a shrinking pool of skilled workers and potential input cost increases, but confidence in the sector is high and firms are still looking to expand well above their long term trend rate over the next six months.”