Confidence among UK businesses has drastically improved, reaching the highest levels seen since 1992. The latest report from accountants BDO has revealed that business optimism is on the rise, possibly signifying further improvements throughout the country.

BDO's Optimism Index – which predicts the performance of companies two quarters ahead – has improved from 103.4 that was seen in December to a reading of 103.8 in January. Not only is this above the 100.00 mark, which means that the long-term historical growth trend is likely to be outperformed within the UK, it is also the highest level of company confidence seen in 22 years.

The manufacturing sector in particular saw a great increase in business optimism. The index recorded a new-all time high in January with figures improving from 115.5, as seen in December, to 117.1. Followed by this was the services industry – which makes up almost three-quarters of the UK's total economy – which saw an increase from 100.7 in December to 101.2 in January.

It wasn't just an overall improvement in confidence that was reflected in the new findings, companies' hiring expectations also saw an increase across January. According to the BDO Employment Index, hiring expectations increased from December's figure of 99.4 to 101.3 in January, marking a great start to the year in terms of job prospects. 

The Employment Index currently stands at the highest level seen since August 2008. It has also managed to break the 100.0 point for the first time since early 2011, projecting that there will be an increase in the number of jobs that are being created throughout the UK over the rest of the year.

Companies are also finding that they are better able to control their outgoings, thanks to low or negative business cost inflation. This is helping all companies, especially those within the manufacturing sector, to reduce overall spending. The BDO Inflation Index reached its lowest point in January – measuring 97.9 – seen since since late 2009, marking a decrease from December's figure of 98.7.  

Peter Hemington, partner at BDO, said: "Companies are raising headcounts in response to rising client demand and the data suggests that the unemployment rate is likely to fall below the Bank of England's seven per cent threshold for considering raising interest rates in the very near future."