Seventh monthly rise

Manufacturers lead rise in business output

Melrose Industries

Business output is at a seven month high

Manufacturers are lifting overall UK business output as they benefit from strong world trade growth and a weaker pound.

Business output has now risen for the past two consecutive months and is edging closer to the long-term growth trend, according to the latest Business Trends Report by accountants and business advisers BDO. The index is at its highest in seven months.

However, output of the UK’s services sector continues to slow, falling further below the long-term growth trend but still above the point of contraction.

The index now suggests that companies in the services sector are struggling to improve performance.

Despite concerns about trade wars and an interest rate rise British businesses remain optimistic about their growth over the next six months.

This can be attributed in part to falling inflation, reducing input costs for businesses.

Martin Gill, lead partner of BDO in Scotland, said: “Global trade is roaring and has provided a huge boost for UK manufacturers.

“However, expectations that this will start to taper off and talks of trade wars could dampen forecasts for the UK economy.

“Hints of an interest rates hike are also making British businesses more cautious. “

> EY’s latest Item Club report says 2018 is set to be another challenging year for financial services, but the outlook is better than many expected.

Although the consumer credit, residential mortgage and business lending markets are all set to have a subdued 2018, the forecast for 2018 and the next few years is better than previously anticipated, due to a stronger than expected economy and the expectation of securing a Brexit implementation period.

Inflation is set to fall and interest rates are forecast to rise gradually this year, albeit slowly, and from record lows.

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