By Daniel Hunter

UK business confidence has reached its lowest point this year, indicating a bleak second half of 2012 for the UK economy, according to the latest Business Trends report by accountants and business advisers BDO LLP.

BDO’s Optimism Index - which predicts business performance two quarters ahead - has hit a six-month low, falling for the fourth consecutive month from 95.5 in May to 93.5 in June. This is the lowest reading since December 2011, and for the first time since January takes the Index below the crucial 95.0 mark that indicates growth.

In addition, the short-term UK economic outlook took a knock in June, as the BDO Output Index - which forecasts business conditions in one quarter’s time - fell from 96.7 to 94.8. This is the single biggest monthly fall in the index since June 2011, reflecting the rapidly weakening short term economic outlook and comes shortly after lower than expected GDP figures for Q4 2011 and Q1 2012 were unveiled. The BDO Output Index highlights the ongoing threat to growth that the UK faces for the back end of the year.

Confidence dropped particularly sharply in the manufacturing sector, as the Manufacturing Optimism Index plunged from 96.5 in May to 83.8, the lowest reading since March 2009. With around half of manufactured exports being purchased by the eurozone, ongoing concerns about growth prospects in the bloc are clearly mirrored by the Business Trends data.

“The figures point to a tough economic climate for the remainder of the year, possibly beyond," Peter Hemington, Partner, BDO LLP, commented.

"As the eurozone continues to be blighted by instability, the UK government must take steps to ensure the UK economy is not at the mercy of the single market. Since half our export goods go to the eurozone, it’s not surprising that turbulence there is denting longer-term growth prospects here.

“A cohesive and outward-looking approach is needed to ensure we exploit all potential avenues for growth — we would urge the Government to collaborate and look for unexplored trade opportunities, not only within the G20, but also with the developing economies to achieve a coordinated and global response to ongoing economic volatility.”

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