Business confidence edged upwards in October giving cause for cautious optimism.

That's the upbeat assessment of accountants BDO, gleaned from the results of its latest Business Trends report which show both output and optimism indicators rose for a second consecutive month.

BDO's Optimism Index, which predicts business performance two quarters ahead, rose to 93.2 in October from 92.5 in September and follows a record low of 89.1 seen in August. Meanwhile, its Output Index, which predicts short-run turnover expectations, rose to 92.1 in October from 91.2 in September, its strongest reading since July 2012.

However, despite the improvement, the UK economy remains fragile, with manufacturers feeling especially gloomy about near term growth prospects. BDO's Optimism and Output indices remain below the 95.0 mark that would indicate a return to growth. And while overall confidence is edging up, significant risks to the economic outlook remain.

Peter Hemington, a BDO partner, said: 'Business confidence is steadily improving so there is cause for cautious optimism. However, UK manufacturers in particular are fearful for the future. To help, we hope the Chancellor's Autumn Statement will set out concrete plans for a UK Business Bank.'

The report also pointed to the threat of Eurozone flare-ups and weak, though improving global growth prospects meant that businesses faced an uncertain outlook for the rest of 2012 and into early 2013.