UK business confidence rises to highest level in two years - YAHOO FINANCE
Fresh data has shown that businesses in the UK have kicked off the year with a fresh spurt of confidence, with a barometer rising to a near two-year high in January.
Lloyds business barometer, which measures businesses’ confidence by assessing their trading prospects and optimism in the economy, shows overall confidence rose to 44% — up nine points on the previous month.
It was the biggest monthly increase since August and the highest level of confidence reported since February 2022, when the UK economy was recovering from the Covid-19 pandemic. It is also the strongest start to a year since January 2016.
The increase in confidence was driven, in part, by the easing of inflation over the past year and the growing expectation that interest rates will start to decline this year, Lloyds said.
The positive sentiment partly reflected optimism about the broader economy. Despite continued geopolitical risks, the survey shows that broader economic optimism has increased, rising to 37%. Trading prospects for 2024 were also the strongest they have been for over six years with the net balance increasing three points to 51%.
Regionally, 10 of the UK’s 12 regions reported increased business confidence with gains across the board. The biggest increases were seen in the North-East, London and the West Midlands. Yorkshire & the Humber, Scotland and the North-West also saw notable gains.
Sentiment dipped in the East of England and Northern Ireland.
The news from Lloyds echoes data from last week that showed UK consumer confidence hit a two-year high in January.
The monthly monitor, published by research company GfK, showed people's views of their finances and broader economic prospects ticked up three points compared to last month, to the highest point since January 2022.
Employment and hiring
While confidence has risen, companies’ hiring intentions bounced back from December’s fall as businesses look to prioritise attracting talent and retaining existing staff members.
Lloyds said the net balance of firms expecting to increase headcount rose by four points to 33% — a result that is higher than almost every month in 2023 except for November.
Meanwhile wage growth is easing. Elsewhere, firms’ expectations for staff pay fell back after December’s rise. The share of companies anticipating wage growth of 4% or more in the next 12 months was the lowest for five months and remains lower than levels across the past year.
Similarly, the share of businesses expecting pay growth of at least 5% also remains below last year’s level. Despite this, the longer-term view shows wage growth expectations still remain above pre-Covid levels.