UK business optimism rises in July on manufacturing rebound

Recent trade agreements could be a driver of this uptick for manufacturing optimism. However, headwinds including weak GDP growth, high labour and energy costs and ongoing uncertainty surrounding future global trade policy continue to weigh on confidence, BDO said in its latest monthly Business Trends report.

BDO’s output index also edged down to 97.79 in July from 98.05 in June, signalling sustained yet muted growth below historic levels. Although new trade deals are showing promise, this has yet to unlock meaningful investments for businesses. Margin pressures remain acute, and companies are still holding back amid uncertainty.

Against this backdrop, the BDO Employment Index fell to 94.11 in July, matching its lowest reading since October 2012. This near 13-year low reflects a marked cooling in the labour market, with declining payrolled employee numbers and falling vacancy rates contributing to subdued hiring sentiment.

While there are survey-based signs of modest improvement in near-term recruitment plans for manufacturers, the structural pressures remain acute across all sectors. Higher employer National Insurance Contributions and April’s rise in the National Living Wage have tightened labour budgets, and businesses are preparing for further cost exposure ahead of the Autumn Statement, BDO said in a press release.

With economic analysis behind the Business Trends report forecasting an unemployment rate peak at 4.9 per cent later this year, there is limited scope for a meaningful recovery in employment conditions. BDO expects the employment index to remain at historically low levels for the rest of 2025.

“There are signs of recovery, but they are fragile. Manufacturers may be breathing a little easier in the wake of trade deals, but their output is yet to catch up,” said Scott Knight, head of growth at BDO. “Business leaders are stuck in limbo, waiting for clearer signals from the government that further investment will be worth the gamble.”

ALCHEMPro News Desk (SG)