Despite a resurgence in private sector jobs, UK businesses do not expect to see economic growth in the near future, according to research by BDO.

The firm says its latest Business Trends report shows its Employment Index has hit a 19-month high, to reach 96.0 in March, the highest since August 2011. This is the third consecutive month that the index has been at or above the 95.0 level that indicates employment growth.

However, BDO's Output and Optimism indices - which predict short-run turnover expectations and business performance a quarter and two quarters ahead - sit at just 93.0 and 92.2 respectively. The firm says the fact these figures are well below the 95.0 mark suggests economic conditions will remain tough until at least mid-2013.

While the report also shows an increase in confidence and output in the service sector, the manufacturing sector's data continued to decline. Optimism for manufacturers plummeted from a reading of 94.5 in February to 88.2 this month, and output also dropped from 94.1 to 92.4.

Peter Hemington, BDO partner, said: 'The plunging confidence of manufacturers is a particular cause for concern. A fundamental part of the coalition government's "rebalancing" strategy is the encouragement of UK manufacturing. So, it was disappointing to see little action taken in last month's budget to help this beleaguered sector. In particular, a time limited increase in capital allowances would have been a good step to take in order to encourage the manufacturing industry to invest and grow.'