Confident consumers are contributing to an upbeat business outlook as they enjoy their best start to a year since the financial crisis, according to accountants and advisers BDO.
BDO’s employment index, which indicates firms’ intentions to hire, remains positive at 105.1. This suggests that employment will continue to increase over the coming months even though the latest ONS labour market figures show that a record 31.3m people are already in work.
Rising wages are also contributing to the UK’s buoyant consumer outlook, with total pay packages up 2.4%, according to the latest ONS labour market figures. The introduction of the National Living Wage is also set to give those on the lowest incomes a welcome boost this April. Coupled with low prices rises (the Consumer Prices Index rose by 0.1% in the year to November 2015) consumers should have a spring in their step to start the New Year. Businesses are feeling the benefits of low price rises too with the BDO Inflation Index remaining at 96.4 for the second month running.
Consumer power is protecting UK business confidence for 2016 from global headwinds. BDO’s Optimism Index – which predicts growth six months ahead – remains above the long term trend at 100.5, despite other major economies facing turbulent times.
Peter Hemington, Partner, BDO LLP, said: “Consumers are really seeing the benefits of the UK’s strong economic recovery, and this is helping British firms to withstand tremors in the global economy. However, there is no room for complacency, and the government needs to protect economic growth by focusing on business investment.
“Initiatives such as raising the annual investment allowance would provide a greater incentive for companies to innovate and help to insulate the UK economy from risks abroad.”