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Pessimism about growth prospects

Businesses remain pessimistic about growth and the economic outlook, but are less worried about inflation, the latest BDO business trends survey said.

The survey's output index remains below 95 which indicates growth, while the optimism index, which predicts business performance two quarters ahead.

BDO said: "Manufacturers' confidence in their prospects for next year is particularly low, with an optimism index score of just 85.9, a decrease of 3.3 from 89.2 in October."

But it said businesses' inflation expectations had fallen to their lowest point since April 2010, pointing to reduced cost pressures on the bottom line of UK companies – the index dropping from 100.2 to 99.2. The output index, which predicts short-run turnover, rose for the third successive month, rising to 93.4 in November, the strongest reading since July 2012.

Neil Craig, partner and head of BDO in Scotland said: "Inflationary pressures are easing, but the UK economy, especially the manufacturing sector, continues to struggle.

"Although it was heartening to see George Osborne announcing on Wednesday that capital allowances for small business will be increased tenfold, this is not enough. Together with measures to revive the construction industry, the Chancellor's New Year's resolution must be to stimulate growth in manufacturing, and more widely, by offering further incentives to invest."

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