Business optimism in the UK increased for a second consecutive month in November, reaching its highest level since July this year, new data has found.
However, the spreading Omicron variant threatens to derail business confidence in the lead up to Christmas, it warned.
According to the latest Business Trends Report from accountancy and business advisory firm BDO, its optimism index rose by 1.49 points last month to reach 104.27. This now sits above the 100-point mark, which represents the long-term average level of business optimism in the UK.
The report said the rise was due to an earlier than usual increase in activity ahead of the festive period, as businesses and consumers make purchases ahead of Christmas to mitigate any possible supply chain disruption.
It comes as the UK government announced new measures on Wednesday night in a bid to curb infection rates over the winter period.
The Plan B restrictions included face masks becoming compulsory in most public indoor venues such as cinemas, theatres, and places of worship. There will be exemptions in venues where it is not practical to wear one, such as when you are eating, drinking or exercising.
NHS COVID passes are also set to be mandatory in specific settings, using a negative test or full vaccination proof. From Monday, those who can will be advised to work from home again.
The most recent data suggests that Omicron has a very high growth rate and is spreading rapidly. As of Wednesday, there are currently 568 cases confirmed across the UK and early analysis from the UK Health Security Agency suggested the doubling time could be as little as 2.5 to 3 days.
BDO said due to this, the recent rise in optimism could be short-lived.
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Elsewhere in the report, BDO’s employment index showed an improvement despite the end of the furlough scheme in September, reaching 108.09.
The 0.44-point increase between October and November suggested that a rise in unemployment after the scheme ended has been less acute than first anticipated.
According to research completed by the Centre for Economics and Business Research (CEBR) as part of the Business Trends report, the UK’s unemployment rate is now expected to peak at just 4.5% this quarter, before falling next year.
This will take unemployment in the UK below its pre-pandemic level by the end of 2022.
“For UK businesses, pandemic recovery feels like one step forward followed by another step back. From supply chain disruption to a new COVID-19 variant, it’s clear that businesses aren’t out of the woods just yet,” Kaley Crossthwaite, partner at BDO, said.
“A rise in both the optimism and employment indices for November is a significant sign of growing business confidence and a positive bounce back in the labour market following the end to furlough.
“While all eyes had been on the Bank of England ahead of a potential rise in interest rates, an increase now seems far less likely in this period of renewed uncertainty.”
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