Optimism amongst the business community is at its highest level since 2000 and output is firmly on the increase, according to the latest report from BDO Stoy Hayward.

According to the research, the improving world economic environment, particularly in Asia, the US and now in Europe, would pave the way for a stronger period of trading for UK business.

BDO’s ‘poll of polls’ indicated both manufacturing and service sectors and small and large firms alike were feeling more positive and predicated there would be a quarter-point interest rate rise later this week.

The business advisors’ own inflation index made a record hike during the last three months, indicating that firms were trying to boost profits by raising their prices at a time of healthier demand.

With business optimism and output indices on the up and consumer and public sector spending strong, BDO said businesses were currently enjoying the best of both worlds.

But BDO warned that a rise in interest rates may lead to households tightening their purse strings in 2004, cooling consumer spending and the housing market.

However, this should redress the balance between consumer spending and business profitability, giving the economy a better chance of sustainable growth, the report claimed.

Peter Hemington, partner at BDO Stoy Hayward said the latest research suggested many UK businesses could breathe a sigh of relief.

“Having suffered testing times this year, the future at last looks brighter, however we’d like to see a few more quarters of growth at these levels before we can be sure we’re back to booming Britain,” he said.

And Douglas McWilliams, chief executive of the centre for economics and business research said the rise in both business confidence and output, along with the hike in BDO inflation index would harden the Bank of England’s resolve to raise interest rates.

“Yet in spite of this, the next six months will see stronger growth than recent months,” he added.

Tell us what you think on our interactive forum or email the editor, matthewt@crimsonpublishing.co.uk