Business optimism has hit its lowest level since May 2017, when Theresa May announced a snap general election, according to new research.
The decline comes as key questions on the UK’s trading relationship with the EU after Brexit remain unanswered and the government ramps up preparations for no deal.
The international economic outlook has also soured, with weak wage growth threatening to undermine demand in some of Britain’s most important export markets.
BDO’s Optimism Index, which shows how businesses expect output to develop in the next three to six months, declined by 0.43 points in August to stand at 101.93. However, output increased marginally from July’s eight-year low.
Optimism in the UK’s service sector, which accounts for approximately 80 per cent of GDP, fell to its lowest level since March 2017.
Increased pessimism has emerged a month after the service sector contracted for the first time in eight years, with output plummeting to 94.73 in July, according to BDO’s index, which combines indicators from a number of closely watched surveys.
Output rebounded slightly in August to 97.17, but remains 3.12 points beneath the figure for this time last year.
Optimism in manufacturing has fared better, rising from 100.16 in July to 102.06 in August. Any figure above 100 indicates growth.
Peter Hemington, a partner at BDO, said lack of progress on a trade deal with the EU was now testing companies’ resilience.
“With the services sector accounting for more than 80 per cent of UK GDP, the government must do more to reassure businesses that it will protect Britain’s 26 million services sector workers as Brexit negotiations take place, particularly considering the UK has the highest share of services exports than any leading economy.”
Last week it emerged that taxpayers would foot the bill for stockpiling of drugs to prepare for crashing out of the EU in March with no trade deal.
