The latest reading of BDO’s Optimism Index, which surveyed over 4,000 executives, shows confidence has dropped to levels last seen during the early stages of the pandemic, with businesses across the services and manufacturing sectors citing persistent inflation, rising costs and weak demand as key factors.
The findings come at a fragile moment for the UK, as companies face ongoing uncertainty around interest rates, labour shortages and subdued consumer spending. While inflation has eased from recent highs, BDO warns that cost pressures remain elevated and continue to erode margins.
Sachin Agrawal, Managing Director for Zoho UK commented: “Rising costs, increasing regulatory pressures, and uncertainty around future demand are making it harder for businesses to plan long-term with confidence, so during these periods, businesses should prioritise creating stability and trust, including with partners, customers, employees and other stakeholders.”
“The most agile, flexible and adaptable businesses are often the ones who are most advanced in digitisation. However, for true resilience, businesses must closely examine their strategy and ensure they have the right leadership style, the right culture as well as the right tools to weather any storm.”
“Investing in technology infrastructure, including in data and AI, can create a strong foundation for businesses. When approached with the right strategy this can drive efficiency and ROI in important growth areas, provide real-time and future-looking insights to determine opportunities and threats, and a myriad of other benefits, which all work to strengthen long-term resilience in the face of wavering market confidence.”
BDO’s data also signals potential risks ahead for investment and employment, with falling confidence historically linked to reduced capital spending and slower job creation. The firm cautions that prolonged weakness in sentiment could hamper productivity and delay economic recovery.
Kenny MacAulay, CEO, Acting Office, a software platform for accounting practice said: “A toxic mix of economic uncertainty alongside increased hiring costs is leaving business leaders cautious about 2026. The UK’s increasing tax burden alongside ever-complex regulations means that navigating the road ahead comes with increased risk.
Key to kickstarting growth is for the government to send a clear signal that it recognises the contributions made by businesses to the economy and provide support and incentives for new hires to take place.”
Despite pockets of resilience, BDO stresses that sustained improvement in business confidence will depend on greater economic stability and clear long-term policy direction.
