Increasing pessimism among small businesses indicates that the sector is sliding into recession, it has been claimed.
The latest poll by accountancy firm BDO Stoy Hayward has found that the short and medium-term outlook is ‘bleak’ for small businesses, with output prospects dropping significantly.
The BDO Output Index, which indicates business expectations one quarter ahead, has dropped from 101.8 in August to 101.0, the lowest figure since April last year.
Medium term confidence has also plummeted, with the figure falling to 100.8 in September from 101.2 in August, its lowest since November 2005.
The figures for the small business sector have fallen below 100, BDO Stoy Hayward revealed.
The poll also found that inflationary expectations have risen sharply, putting the Bank of England in a difficult position regarding October’s interest rate decision, the accountancy firm said.
Peter Hemington, partner at BDO Stoy Hayward LLP, commented: “If [the bank] keeps rates on hold, UK business will condemn it for timidity, just as the banking lobby attacked the Bank for its failure to intervene in the three month interbank market.
“If the Monetary Policy Committee (MPC) cuts rates, there is a risk that it will be seen as weak on inflation. Our data shows that, although confidence has suffered over the last month, inflationary expectations have strengthened markedly.”
He added that it would come as no surprise if the MPC voted to keep the interest rate at 5.75% next month.
© Crimson Business Ltd. 2007
