UK economy rebounding, says BDO

Economic output and confidence are at their highest level for two years, indicating that the economy is growing at an annualised rate of 2.5 per cent in the early weeks of 2010.

The findings of research carried out by the accountancy group BDO into monthly business trends published yesterday confounds the view that the economic recovery will be laboured. The firm said that its output index increased to 99.7 in December, up from 96.3 the previous month. The leap was the biggest since the end of the recession in the early 1990s.

Separately, BDO's "optimism" index was up to 100.5 last month, an improvement on November's 96.3. Taken together, the firm argues that "the indices are consistent with annualised GDP growth of around 2.5 per cent in the fourth quarter of 2009 and the first quarter of 2010".

The forecast is better than most economists have predicted. The Office for National Statistics is scheduled to publish official growth figures for the fourth quarter of 2009 at the end of the month.

"The 2.5 per cent figure is a huge jump, but historically there is a strong correlation between the index and the eventual figures," said Peter Hemington, a partner at BDO. "However, restrained lending, a likely rise in taxes and the possible effect of political uncertainty on sterling could all hamper performance later on in the year."