Labour shortages and supply chain disruptions coupled with rising inflaton continue to hit Britain’s businesses, with output growth in October slowing to its lowest level since March and with the manufacturing industry edging closer a decline in output, according to a survey.
Accountancy and business advisory firm BDO said the output index in its monthly Business Trends report shrank to 103.35 points in October from 105.23 in September. Declines were seen across both manufacturing and services, which fell to their lowest respective levels since March.
The manufacturing sector has been particularly badly hit by supply chain problems and its output growth fell by 2.09 points to hit 97.03 in October, edging closer to the 95-mark which separates growth and decline, BDO said.
In the services sector, staff shortages are the biggest challenge and output growth dropped by 1.85 points to 104.15 in October.
The termination of the furlough scheme at the end of September led to a fall in BDO’s employment index for the first time since January, when economic activity was curtailed by a COVID-19-related lockdown. The employment index fell by 1.13 points to 107.65 in October, but the decline is expected to be short term as the economy continues to recover..
BDO’s inflation index continued to rise in October and is now at its highest since April 2017, driven by the rise in energy prices.
Kaley Crossthwaite, partner at BDO, said: “Businesses are facing an increasingly difficult winter. Between rising inflation and a lack of staff, 2022 could be a difficult year for companies who have been forced to prioritize short-term problems over long-term growth. At the same time, consumers are beginning to see the impact of these shortages with rising fuel and energy prices, which may in turn lead to cutbacks in discretionary spending.
“In the final months of the year, businesses and consumers alike will be hoping that the economy can find some Christmas spirit over November and December and help take us into the new year on a high.”