Business output hits four-year high

A surge in services sector spending, alongside AI and defence-related manufacturing, pushed business output to its highest level in more than four years, while business optimism has also strengthened, according to the latest Business Trends report from accountancy and advisory firm BDO LLP.

BDO’s Output Index climbed to 100.46 in October, up from 97.37 in September, reaching its highest level since July 2022.

Growth was largely driven by the services sector, reflecting a recovery in client demand, supported by increased spending on technology services and AI-related investment. A similar reading for BDO’s Output Index hasn’t been seen since July 2022, when the services sector experienced a post-pandemic summer boost.

Manufacturing output also improved modestly, with production growth at its strongest in around two years thanks to increased AI and defence-related orders.

This growth increased manufacturers’ confidence in future orders and helped push up BDO’s Optimism Index, which measures business confidence, to 94.73 in October – a high not reached since before the 2024 Autumn Budget.

With the 2026 Autumn Budget now delivered without major new burdens on business, investment decisions that had been paused pending policy clarity are expected to be released over the coming months.

Early signs of improvement emerged as the number of payrolled employees rose by a provisional 13,000 in September, the largest monthly increase in over a year, while unemployment fell to 4.7%, its lowest level in over a year, according to figures from the Office for National Statistics (ONS).

However, BDO’s Employment Index (a measure which reflects the broader labour market by combining evidence on hiring intentions, headcount and labour demand) was essentially unchanged in October, increasing by just 0.02 points to 93.12. It remained below the 95-point threshold that indicates growth for a 22nd consecutive month and is expected to remain around this level for some time.

Scott Knight, Head of Growth at BDO, said “Last week’s ‘non-Budget’ and the absence of any significant new costs will be a relief to businesses. For the first time in years, genuine growth seems to be on the table. The challenge for the government now is to turn this potential into reality.”