UK business confidence surges to one-year high

·4 min read
According to the Lloyds Bank Business Barometer, the jump in confidence highlights progress in the UK’s vaccine rollout programme. Photo: Nick Potts/PA via Getty
According to the Lloyds Bank Business Barometer, the jump in confidence highlights progress in the UK’s vaccine rollout programme. Photo: Nick Potts/PA via Getty

Business confidence in the UK increased by 13 percentage points to 15%, the highest level since the start of the pandemic in March last year.

According to the Lloyds Bank Business Barometer, the jump in confidence highlights progress in the UK’s vaccine rollout programme and clarity provided by the government’s roadmap out of lockdown.

The latest increase in confidence was driven by gains in firms’ trading prospects and their optimism about the wider economy, the report said. The net balance of firms reporting stronger optimism about the economy increased by 15 points to 17%.

Overall business confidence is calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy. The survey was taken between 1 and 15 March.

The data also showed that the net balance for staffing levels is positive for the first time since the outbreak, rising by eight points to 4%, reflecting a higher share of companies expecting to hire staff.

Over a quarter of companies expected to add to their workforce, up two percentage points on last month, while 22% are anticipating reductions.

This was boosted by chancellor Rishi Sunak’s extension of the furlough scheme to the end of September 2021.

It came as 25% of firms anticipated a pay freeze in the coming year, down one point from February and two points from January. However, the proportion anticipating pay rises of 2% or more fell marginally to 17% from 18%, and remains around the average level since the start of the pandemic.

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Confidence increased across 11 of the 12 UK regions and nations with companies most upbeat were found in the North East (up 25 points to 26%), the West Midlands (up 24 points to 27%) and the North West (up 13 points to 26%).

Business confidence in Wales turned positive (9%) for the first time in a year, with Scotland also reporting an increase, (up 15 points to -2%), which is the highest level since December 2019. Northern Ireland reported the only dip in confidence, falling by nine points to -6%.

Manufacturing and retail sectors recorded the biggest increase in overall confidence, while services edged into positive territory (3%) for the first time since February last year.

“We have completed a full circle since lockdown began in March 2020 and it is uplifting to see businesses portraying confidence for the months ahead, Paul Gordon, managing director for SME and mid corporates and Lloyds Bank Commercial Banking, said.

“The months ahead will play a pivotal role in charting the course for the UK’s recovery and we remain by the side of businesses as they go along on this journey.”

Monday marked the first day that people in England were able to meet in groups of six for the first time in months, ending the usual “stay at home” messaging as part two of the easing of restrictions.

WATCH: Groups of six can meet outdoors as lockdown eases in England

At this stage of the roadmap, people can only meet with other households in outdoor spaces, including parks and private gardens, with the government requesting that people stay local, and maintain social distancing. Limits on the number of people who can meet outside in England will not be raised until step three in May.

The Lloyds Bank Business Barometer found that businesses surveyed appeared to support the speed at which lockdown restrictions are being eased.

The majority of firms (57%) agreed with the pace of reopening their sector, although there a significant minority (34%) prefered a quicker lifting of restrictions. Just 9% of firms said they would benefit from a slower pace.

Hann-Ju Ho, senior economist and Lloyds Bank Commercial Banking, said: “The broadly positive outlook is driven by steady vaccine deployment, the roadmap out of lockdown and the extension of government support measures. It will be interesting to see whether the momentum for stronger business optimism is sustained in the months ahead.”

Some 30 million people have now received their first dose of the coronavirus vaccine in the UK, according to the latest government data.

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