British businesses expect to increase hiring over the next six months but given falling confidence among manufacturers, they do not anticipate overall growth in the nation's economy, a survey showed on Monday.
An optimism index from accountancy firm BDO, which measures business performance expectations two quarters ahead, rose to 92.2 in March from 90.6 in February.
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But both the optimism and output indices compiled by BDO remained below 95 which marks the dividing line between growth and contraction for the survey, BDO said in a statement.
BDO's employment Index, which measures UK businesses' hiring intentions over the next two quarters, reached 96.0 in March, the highest since August 2011.
The British economy could already be in its third recession in five years although the strength in the labor market has surprised economists.
Service sector confidence rose substantially in March but optimism in the manufacturing sector deteriorated sharply - falling to 88.2 in March from a reading of 94.5 in February, according to BDO.
A falling pound, which makes imported components more expensive, and weak demand for British exports from struggling euro zone economies were among the factors weighing on manufacturers' confidence, BDO said.
"It was disappointing to see little action taken in last month's budget to help this beleaguered sector," Peter Hemington, partner at BDO said of manufacturing.
Manufacturing activity, which accounts for around a fifth of the economy and is at the forefront of the government's recovery efforts, fell for the second consecutive month in March.
The indices are calculated from data including purchasing managers' surveys and surveys by the Confederation of British Industry and the Bank of England.
(Reporting by Dasha Afanasieva; Editing by Ruth Pitchford)