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Divergent business optimism highlights two-track economy

BDO calls for a more aggressive and active plan to rebalance the UK economy, as optimism in the services sector is offset by manufacturing concerns

DIVERGENT performance in UK business risks a two-track economy, warns BDO.

Its latest Business Trends report finds that optimism remains above its long-term trend, at an index score of 101.9, but this is driven by the services sector while manufacturing languishes at 90.2.

While trading is currently good in manufacturing, the low score suggests a dip in fortunes through 2016. The latest results suggest that chancellor Geroge Osborne has much to do to help create a so-called ‘march of the makers’.

“These figures show that the UK needs to act now to support our manufacturing industry,” said BDO partner Peter Hemington.

“The government’s plans to encourage a more balanced economy are clearly right, but need to be accompanied by far more action. For instance, incentives to invest and plan for future success should be increased significantly.”

BDO’s Building the New Economy Report calls for a greater role for manufacturing in helping to rebalance the economy and makes a series of policy recommendations, including:

  • Zero VAT for domestic supplies to UK exporters; and
  • Dramatically increase the annual investment allowance

A broader survey, encompassing finance professionals, shows economic confidence at its lowest point around the world in the last four years.

Emerging markets in the Asia/Pacific region have suffered the biggest dip in confidence, as global commodity prices continue to fall and the Chinese economy slows. Recruitment and staff investment have frozen in the region. Chinese finance professionals have, themselves, seen a drop in confidence.

It also flags up concerns that of a faltering US economy, with exports, manufacturing growth and employment all underperforming.

The Global Economic Conditions Survey (GECS) was carried out jointly by ACCA and the Institute of Management Accountants.

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