By Elliot Gulliver-Needham
Business confidence has reached its highest level since February 2022, as firms bet that falling inflation and interest rate cuts will boost the economy.
Overall confidence rose in the Lloyds Business Barometer, which measures businesses’ confidence by assessing their trading prospects and optimism in the economy, rose to 44 per cent in January, up nine points from last month.
Hann-Ju Ho, senior economist at Lloyds, noted this had been the strongest start to a year since January 2016.
Every sector of the economy except retail saw confidence grow. Services increased 15 points to 45 per cent; manufacturing increased to 49 per cent; and construction rose eight points to 45 per cent.
Within the survey, broader economic optimism increased to 37 per cent, while trading prospects reached a six-year high, increasing three points to 51 per cent.
“The reduction in inflation, albeit with the recent uptick, and the belief that interest rates may have peaked is likely driving the rise in confidence among firms,” said Ho.
“With ongoing geopolitical issues and a general election on the horizon, businesses will have factored these into their risk radars and will be working to prepare for any potential impacts on their trading prospects.”
Pricing expectations of firms fell for a second month, with 60 per cent of firms planning to raise their prices (down two points), while four per cent planned to cut prices.
Ho noted that half of the 1,200 firms surveyed for the barometer had said they were planning to increase headcount throughout 2024.
“Despite that and the changes to minimum wage that will come into force in April, expectations for staff pay fell back following last month’s increase,” he added.
