Business confidence in the UK has reached its highest level since November 2015, according to a recent report by Lloyds Bank. This surge in sentiment is likely to be highlighted by the Conservative government as evidence of economic momentum under Prime Minister Rishi Sunak.
Lloyds Bank’s latest business barometer index revealed an 8-point rise in confidence, bringing the overall level to 50 per cent in May. This data indicates a growing optimism among companies regarding their trading prospects, with many planning to increase both 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 showcased a significant rise in economic optimism, with a notable 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, marking the strongest reading since March 2017.
Since taking office in October 2022, Prime Minister Sunak has been working to convince voters of economic stability. The recent data from Lloyds Bank supports his claims, showing that inflation has fallen to 2.3 per cent, edging closer to the Bank of England’s 2 per cent target, down from a peak of 11.1 per cent. Despite the UK exiting a recession in the first quarter of this year with a 0.6 per cent GDP growth, the country has faced challenges, including a historic decline in living standards.
However, business confidence has seen improvements across various regions, notably in the southeast, Scotland, and the West Midlands. Hann-Ju Ho, senior economist at Lloyds Commercial Banking, highlighted the broad-based improvements in confidence across multiple sectors, including services and construction.
The survey also pointed out that over 60 per cent of businesses plan to raise prices, driven by the need for margin regeneration. While inflationary pressures persist, especially in the services sector, the labour market remains robust with historically low unemployment at 4.3 per cent. Wage expectations also remain high, with a significant proportion of businesses anticipating wage growth between 3 to 5 per cent.
The rise in business confidence is viewed as a precursor to increased spending and investment. Recent crises, such as the pandemic, the war in Europe, and an energy shock, had severely impacted confidence. However, the current upturn suggests a more optimistic outlook for the future.
As the UK economy shows signs of picking up pace, it remains to be seen whether Prime Minister Sunak will fully benefit from this recovery ahead of the next election. Labour leaders Sir Keir Starmer and Rachel Reeves may find themselves inheriting this 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.
