In the UK, business confidence exhibited a modest increase last month, buoyed by expectations of potential interest rate reductions later in the year, despite ongoing budget uncertainties set to be addressed on October 30.

The BDO Optimism Index recorded a rise to 100.42, marking the fifth consecutive month that the index has exceeded the 100-point threshold. August’s figure was slightly lower at 100.33.

Conversely, BDO’s Output Index dipped by 1.52 points, settling at 98.19, as both the manufacturing and services sectors encountered challenges due to weak demand.

The manufacturing sector, in particular, has been impacted by disruptions in the supply chain and escalating shipping costs, worsened by the ongoing crisis in the Red Sea, resulting in longer lead times and increased raw material expenses.

Even though the services sector’s output declined compared to the previous month, it still remained above the 95-point mark, suggesting an overall growth trend.

This growth was mainly driven by an uptick in domestic demand, especially in the technology, real estate, and leisure industries; however, the uncertainty surrounding the upcoming autumn budget has caused some firms to postpone investment plans.

In a related development, HSBC’s annual capital expenditure report revealed that 81 percent of technology companies anticipate growth this year, with over a third—34 percent—projecting significant expansion.

This optimism is partially attributed to the surge in artificial intelligence, with 70 percent of IT firms surveyed expressing positive outlooks, significantly surpassing optimism levels in other sectors.

Overall, the report indicated that more than half of UK businesses, at 55 percent, harbor positive growth prospects for the upcoming year, marking a 9 percent increase compared to last year.

The findings, derived from a survey of 1,583 HSBC business customers, demonstrated that two-thirds of businesses have ambitions for growth, up from 64 percent last year, with over one-fifth aiming for at least 20 percent growth.

According to HSBC, sectors exhibiting greater caution include those dependent on consumer spending, which has faced mounting pressure due to rising costs—such as hotel and restaurant businesses, along with high street retailers.

The study noted that 35 percent of hotels and restaurants expressed pessimism, followed by 21 percent of retail and wholesale businesses.

Additionally, BDO’s employment index fell for the 15th consecutive month, reaching 95.45—its lowest level since January 2013—indicating that although unemployment has decreased, the labor market remains volatile.

The accountancy firm’s Inflation Index experienced a slight decline in September, dropping to 96.41. While input prices have seen a reduction, the ongoing rise in consumer prices—especially in services—suggests that inflationary pressures may re-emerge in the near future.