BDO downgrades growth prospects

The Output Index, part of the mid-tier firm’s monthly Business Trends Report, published today, showed business optimism had fallen considerably – from 99.2 in October to 98.7 last month.

The index implies economic growth for the first quarter of 2002 will be 1.4%, well below Gordon Brown’s pre-Budget forecast of 2 to 2.5%.

The report shows confidence in the service sector suffered the biggest fall – from 95.2 in October to 94.4 in November. Although small businesses remain optimistic the report said lack of confidence from larger companies would filter down eventually.

This lack of confidence is reflected in the latest CBI/Deloitte & Touche quarterly survey, which showed service sector output declining and employment levels falling.

But the report says despite a gloomy end of the year, the UK is set to avoid recession because inflation is under control and the Bank of England’s Monetary Policy Committee is likely to continue cutting interest rates next year.

Douglas McWilliams, chief executive of the Centre for Economics and Business Research, authors of the report, said: ‘It will be a gloomy end to the year, but at the beginning of next year the MPC will be far better placed to take remedial action on interest rates.’

BDO partner Peter Hemington said: ‘The MPC’s interest rate cuts and low inflation are ensuring that consumers keep spending, and are putting the UK in a far better position to weather the storm than other leading world economies.’


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