The continued success of the UK’s vaccination rollout programme led to a significant rise in services sector confidence in February, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.
The BDO Services Optimism Index surged from 86.60 in January to 94.13 in February – a 12 month high – as the proportion of the population that has received the coronavirus vaccine continued to rise. The growth of the Index, which encompasses a range of industries from retail and hospitality to professional services, suggests that many businesses had anticipated a significant return to normality even before the Government set out its lockdown roadmap at the end of February.
This renewed confidence was echoed in the Chancellor’s Budget speech last Wednesday, in which Rishi Sunak hailed “light at the end of the tunnel” for a post-pandemic recovery. Having set out the broad shape of his tax policy for the next four years ahead of “Tax Day” later this month, business confidence is expected to be bolstered further by the continuation of the Chancellor’s expansionary fiscal stance for the coming months.
While the services sector outlook is buoyant, BDO’s Manufacturing Optimism Index edged marginally downwards by 0.27 points in February, taking the Index to 83.99. Any optimism felt by manufacturers due to the continued success of the vaccine rollout has been offset by Brexit border tensions which continue to impact the sector.
Elsewhere in the report, the BDO Employment Index rose slightly from 107.64 in January to 107.68 in February, as the UK labour market shows some early signs of stabilising. While modest, this is the first increase in the Employment Index in four months. With the furlough scheme now extended until the end of September, concerns of an immediate spike in unemployment have been staved off, paving the way for continued stability in the months ahead.
Richard Rose, partner and head of BDO LLP in the Midlands, said: “The speed of the vaccine rollout across the UK has given businesses a much-needed shot of relief.
“With business lifelines extended in the shape of the prolonged furlough scheme, and an extra dose of support provided to hospitality via extensions in business rates relief and the VAT cut to 5%, there is reason to believe this optimism can be sustained as we gradually emerge from lockdown.”