Biggest monthly fall in business output since first lockdown

The impact of national lockdown restrictions in January caused UK business output to fall at a rate not seen since April 2021, according to the latest Business Trends report from accountancy and business advisory firm BDO LLP.

The BDO Output Index, which provides a comprehensive snapshot of business output by weighting macroeconomic data from the UK’s main business surveys, fell by 5.38 points in January to 70.44. This can be a seven-month low for the Index. Having borne the brunt from the restrictions, the services sector drove the decline, with output dropping for a third consecutive month in January.

Despite this downturn, business activities remains significantly higher than it did in April 2021, once the BDO Output Index plummeted to 44.90 points. This is largely because businesses have had time to adapt to the current restrictions, enabling many to carry on providing some level of service. BDO’s Services Output Index therefore remains 24.14 points higher than it stood in April 2021 when the first nationwide lockdown took hold.

Elsewhere within the report, the BDO Optimism Index hit a six-month little as it edged downwards from 86.96 to 86.34 points in January. This comes regardless of the Brexit deal secured at the end of December, which provided some clarity around the UK’s future relationship with Europe. With stories since emerging of difficulties in trading with the EU, optimism may take a further knock as businesses still navigate checks, delays and bureaucracy.

Commenting on the results, Richard Rose, partner and head of BDO LLP within the Midlands, said: “While these figures illustrate the seriousness of the impact that national lockdown restrictions are having on the economy, they also show the resilience of UK businesses – many of which have developed new procedures, products and services to allow them to continue trading.

“Using the government expected to outline the nation’s ‘route map’ from lockdown in the coming weeks and because the UK’s successful vaccination rollout continues, sentiment should rebound providing disruption to trade over the channel is minimized with further government support.”