Business confidence in the UK has surged to its highest level in nearly a decade, according to the latest figures from Lloyds Bank’s business barometer index.
This boost in confidence, the highest since November 2015, is expected to be highlighted by the Conservative government as evidence of economic momentum under Prime Minister Rishi Sunak.
Lloyds Bank reported an 8-point rise in its business barometer index, bringing confidence to 50 per cent in May. The data revealed growing optimism among companies about their trading prospects, with many planning to increase their workforce and output. Specifically, 62 per cent of businesses anticipated higher output in May, up from 57 per cent the previous month, while only 8 per cent forecast a decline.
The report also indicated a significant rise in economic optimism, with a net increase in positive sentiment. More than half of the businesses surveyed plan to expand their workforce, and only 15 per cent expect to reduce staffing levels. This net balance rose by 6 points to 39 per cent, the strongest reading since March 2017.
Prime Minister Sunak has been working to convince voters of economic stability since he assumed office in October 2022. The recent data from Lloyds Bank may bolster his claims, showing that inflation has fallen to 2.3 per cent, close to the Bank of England’s 2 per cent target, down from a peak of 11.1 per cent.
Despite exiting recession in the first quarter of this year with a 0.6 per cent GDP growth, the UK has faced challenges, including a historic decline in living standards. Nevertheless, business confidence has improved across the UK, with notable gains in the southeast, Scotland, and the West Midlands.
Hann-Ju Ho, senior economist at Lloyds Commercial Banking, noted the broad-based improvements in confidence across various regions and sectors, including services and construction. The survey also indicated that over 60 per cent of businesses plan to raise prices, citing margin regeneration as a key factor.
While inflationary pressures remain, particularly in the services sector, the labour market continues to be robust with historically low unemployment at 4.3 per cent. Wage expectations remain high, with a significant proportion of businesses anticipating wage growth between 3 to 5 per cent.
The rise in business confidence is seen as a precursor to increased spending and investment. Recent economic crises, including the pandemic, the war in Europe, and an energy shock, had severely impacted confidence. However, the current upturn suggests a more optimistic outlook.
As the UK economy shows signs of picking up pace, it remains uncertain if Prime Minister Sunak will fully benefit from this recovery before the next election. Labour leaders Sir Keir Starmer and Rachel Reeves may find themselves inheriting the positive economic momentum.
Overall, the latest figures from Lloyds Bank present a hopeful picture for the UK economy, indicating that businesses are gearing up for growth and stability after a turbulent period.
