LONDON — UK business confidence rose to its highest level in 15 months over December, following an uptick in economic performance across all sectors which defied most economists’ forecasts.
Accountancy firm BDO’s Optimism Index, which indicates how firms expect their order books to perform in the coming six months, increased from 98.0 to 102.2 over December — the sharpest increase observed since 2009.
The rise comes after an improvement in the UK manufacturing and services sectors towards the end of 2016, suggesting that firms have remained resilient amid the fallout from the June referendum, the dropping value of the sterling, and the volatile global economy.
According to PMI data released last week, the services sector — which includes everything from retail to banking — drew a reading of 56.2 in December, up from 55.1 in November.
That followed a big manufacturing beat, with the PMI rising from 56.1 from 53.6 in November — above the average of 53.1 predicted by economists in a Reuters poll. It was boosted by UK car production which in November hit its highest level since 1999.
The news comes after several major forecasters admitted errors in their forecasting which suggested the UK economy would be less resilient than it has proven to be. American investment bank Morgan Stanley said it was “eating humble pie” over its prediction that Britain would fall into immediate recession when it voted to leave the European Union.
Meanwhile, the Bank of England’s chief economist Andy Haldane told an audience last week: “It’s true, again, fair cop. We had foreseen a sharper slowdown in the economy than has happened, in common with almost every other mainstream macro-forecaster.”
BDO’s Employment Index — which reflects firms’ hiring intentions over the coming six months — was also upbeat. It currently sits at 101.1, above the long term trend, although fractionally below the November level of 101.2 .