Output gains fail to lift business confidence
Output gains fail to lift business confidence
- Business confidence weakens as BDO’s Optimism Index falls to lowest level in nearly five years
- BDO’s Output Index showed only modest improvement, remaining below its long-term trend despite a slight uptick in December
UK business confidence weakened sharply at the end of 2025, according to the latest Business Trends report from accountancy and advisory firm BDO LLP, with BDO’s Optimism Index falling to its lowest level in nearly five years.
The Optimism Index fell to 90.01 in December, down from 93.45 in November. This marks its weakest reading since January 2021, driven by uncertain demand prospects and subdued expectations for future turnover and employment heading into 2026.
The decline in confidence was broad-based across both manufacturing and services, despite a small uptick in BDO’s Output Index, which rose 1.53 points to 98.27 in December as a result of stabilising conditions in the services sector, where companies saw a small increase in requests for new work.
However, the Output Index remains firmly below long-term growth levels from the past 25 years, pointing to only tentative improvement. Despite month-on-month gains, the Index has remained within the 95–100 range since January 2025, with continued weak growth rather than a meaningful rebound.
In the manufacturing sector, output remained in negative growth territory for December at 94.26 as subdued confidence and high operating costs continue to weigh down growth.
In effect, conditions eased slightly at the end of the year, supported by lower borrowing costs following the Bank of England’s rate cut and easing input price pressures, but activity has yet to shift into a sustained recovery and the economy remained under pressure, despite being in the traditional ‘Golden Quarter’.
The close relationship between business confidence and economic activity suggests that persistently low optimism is likely to keep output constrained into next year, even as easing inflation offers limited relief.
Scott Knight, Head of Growth at BDO, said:
“Business confidence is at its weakest in years. It is far from ideal. Business costs are rising and turnover expectations are falling; it’s no wonder that optimism is on the floor. Decisive action like further interest rate deductions and a clear roadmap of what’s ahead is critical if they're to grow and invest.”
ENDS
Overview of the BDO indices
An overview of all four indices is provided in the table below, detailing figures for the last three months and the same month of the previous year, to allow for comparison. 100 = average value. Above 95 = positive.
BDO’s Business Trends is comprises multiple surveys covering 4,000 respondents. Further information on inputs and the data included is available on request, but please note the ONS Labour Force Survey is not one of them.
| December 2025 (figures in this report) |
November 2025 | October 2025 | September 2025 | August 2025 | July 2025 | June 2025 | May 2025 | |
| BDO Optimism Index | 90.01 | 93.45 | 93.30 | 93.38 | 93.18 | 91.96 | 91.58 | 92.30 |
| BDO Output Index | 98.27 | 97.77 | 101.84 | 97.84 | 97.61 | 98.14 | 98.64 | 97.40 |
| BDO Inflation Index | 98.80 | 99.07 | 99.28 | 101.02 | 100.57 | 99.72 | 99.10 | 99.59 |
| BDO Employment Index | 93.32 | 93.53 | 93.95 | 93.90 | 94.01 | 94.11 | 94.22 | 94.32 |
Note to editors
BDO LLP operates in 18 offices across the UK, employing 8,000 people. It has UK revenues of £1bn.
It provides Audit, Tax, Deals, and Consulting, Risk & Outsourcing services predominantly to mid-sized, entrepreneurially-spirited, high-growth businesses that are driving growth in the UK economy. BDO calls this segment of the market the UK’s economic engine.
BDO LLP is the UK member firm of the BDO international network.
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The BDO global network provides business advisory services in 166 countries and territories, with more than 119,000 people working out of 1,800 offices worldwide. It has revenues of US$15bn.
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