The latest Business Trends Report produced by BDO, accountancy and business advisory company, indicates that during the second half of 2012 the UK economy may stabilise as business confidence rises. Although a recession is likely, the effects won’t be as harsh as 2008-09. The Optimism Index produced by BDO provides a forecast for the next two quarters of business confidence which increased in January 2012 to 94.1. Although the increase remains below the growth indicator of 95.0, it improves on the figure for December 2011 of 91.5.

According to BDO the data indicates a possible recovery in the last six months of 2012. The services and manufacturing industry have both seen an increase in the Optimism Index, both just under the figure which indicates growth.

Inflation is expected to fall throughout 2012, with the rate of inflation expected to drop to 2.8 percent by March 2012. The Bank of England forecast the inflation rate to fall to 2.0 percent by the year end, and figures from BDO’s Inflation Index show that this is likely.

The Output Index however, indicates that the UK economy faces weak prospects in the short term. The Index measures expectations of turnover for the next three months, and figures fell for the eighth month in a row to 91.2. Although conditions remain difficult, predictions for the second half of the year are positive. Maximising all tax breaks and stringent financial planning with an accountancy service is essential for all small businesses.

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