Business confidence reached its highest level since May last year as bosses become more optimistic about the wider economy, a new survey has found.

Confidence reached 33 per cent on the monthly index this month, up from 32 per cent in March, the latest monthly sentiment index by Lloyds Bank showed.

The survey of businesses between April 3 and 16 found that overall economic optimism rose by five points to 28 per cent, which is also close to a one-year high. The increase follows an 11-point rise in March as businesses benefit from a fall in wholesale gas prices, better-than-expected consumer spending and an improvement in economic forecasts for growth.

A majority of businesses expect to increase their prices in the coming year, with 61 per cent of respondents to the survey planning to do so.

Nearly half, or 47 per cent, of businesses are looking to recruit, marking the fifth consecutive month that anticipated staffing levels have increased.

Pay growth hit its highest level in seven months, with 27 per cent of businesses expecting to increase wages by at least 3 per cent.

Paul Gordon, managing director of relationship management, business and commercial banking at Lloyds, said: “It is great to see business confidence continuing to increase, hitting a near one-year high. Hiring intentions have also shown improvement since the start of the year, now sitting significantly higher than pre-lockdown levels. This is an encouraging sign of investment intent, but that could be tempered by wage inflation pressures and a hot employment market.”

Meanwhile, the latest forecast from PwC estimates that the UK will grow by 0.1 per cent this year before returning to 1 per cent growth by the end of next year. The accountant is among a number of prominent forecasters that believe Britain will avoid a recession this year, including the Bank of England and the Office for Budget Responsibility. Gross domestic product, the key measure of the size of the economy, will rise by 1.6 per cent by the end of 2025, PwC said.

GDP stagnated in February after rising by 0.4 per cent in January. Falls in services and production output in February were offset by growth in construction work.

Forecasters expected the longest recession since the financial crisis after inflation hit a 41-year high of 11.1 per cent last October, but the economy has proved more robust than many had projected. Barret Kupelian, senior economist at PwC, said: “Our analysis suggests the UK has very much passed through the eye of the inflationary storm compared with last year, and is showing signs of a return to some sort of normality this year.” He added that prices at the end of next year are expected to be 20 per cent higher than they were at the start of 2021.

“What is important, as the immediate inflation pressures abate, is to look seriously at the structural issues facing UK productivity,” Kupelian said.

“In particular, tackling the UK’s relatively high levels of labour inactivity across over-50s could provide a notable increase in growth in a relatively short period of time.”