Business confidence in the UK has risen to its highest level in nearly a decade, according to the latest figures from Lloyds Bank's Business Barometer Index.
The Conservative government is expected to highlight this increase in confidence, the highest since November 2015, as evidence of economic momentum under Prime Minister Rishi Sunak.
Lloyds Bank announced an 8-point rise in its business barometer index, raising confidence to 50 per cent in May. The data revealed growing optimism among companies about their business prospects, as many of them plan to increase their workforce and production. Specifically, 62% of companies expected production to rise in May, up from 57% the previous month, while only 8% expected a decline.
The report also noted a significant rise in economic optimism, with a net increase in positive sentiment. More than half of the companies surveyed plan to expand their workforce, and only 15 percent expect to reduce staffing levels. This net balance rose by 6 points to 39 percent, the strongest reading since March 2017.
Prime Minister Sunak has been convincing voters of economic stability since taking office in October 2022. Recent data from Lloyds Bank may reinforce his claims, showing that inflation fell to 2.3 per cent, close to the Bank of England's 2 per cent rate. target, down from the peak of 11.1 percent.
Despite emerging from recession in the first quarter of this year with GDP growth of 0.6 per cent, the UK has faced challenges, including a historic decline in living standards. However, business confidence improved across the UK, with notable gains in the south-east, Scotland and the West Midlands.
Han Ju Ho, chief economist at Lloyds Commercial Banking, noted widespread improvements in confidence across regions and sectors, including services and construction. The survey also indicated that more than 60 percent of companies plan to raise prices, citing profit margin renewal as a key factor.
While inflationary pressures remain, particularly in the services sector, the labor market remains strong with the unemployment rate falling to a historic low of 4.3 percent. Wage expectations remain high, with a large percentage of companies anticipating wage growth of between 3 and 5 percent.
Rising business confidence is a precursor to increased spending and investment. Recent economic crises, including the pandemic, war in Europe, and the energy shock, have severely affected confidence. However, the current improvement indicates a more optimistic outlook.
With the British economy showing signs of recovery, it remains uncertain whether Prime Minister Sunak will fully benefit from this recovery before the next election. Labor 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 of the UK economy, suggesting that businesses are poised for growth and stability after a turbulent period.