Business confidence in the UK has rebounded to a 13-month high, according to the Lloyds Bank Business Barometer. The confidence index saw an increase of nine points to 37% in the first half of June, marking the largest monthly rise since March 2023.
The uplift in confidence was mainly driven by firms’ optimism about their trading prospects and the broader economy, despite a recent interest rate hike. All four major industry sectors (manufacturing, construction, retail, and services) reported increases in business confidence.
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, commented on the findings: “It’s encouraging to see business confidence rebounding following last month’s five-point dip to 28%. Trading prospects and optimism have seen a resurgence this month with overall confidence up in all but two of the twelve regions of the UK, which shows positive prospects across the wider economy.”
While business confidence is on the rise, many businesses continue to grapple with interest rate increases and cost pressures. Ho added, “However, we await to see the impact of the latest 50 basis point rise in base rate.”
In terms of regional insights, confidence rose in ten of the UK’s twelve regions and nations. The East Midlands and Scotland witnessed the most significant boosts in confidence, while London and the South West were the only regions to record falls.
The service sector, which saw an 11 point rise in business confidence to 37%, and the manufacturing sector, which reached a 16-month high of 50%, were the biggest beneficiaries of the confidence rebound.
Paul Gordon, managing director for relationship management, Lloyds Bank Business & Commercial Banking, said: “The boost in confidence and hiring intentions is a welcome sign that businesses are managing well in what continues to be a challenging environment. It’s particularly pleasing to see that for both services and manufacturing, two sectors which have been hardest hit in recent years, there is real optimism for trading prospects and growth.”
Despite the overall positive outlook, Gordon pointed out that wage pressures remain above pre-pandemic levels, cautioning that “firms need to be mindful of this and ensure that costs are evenly distributed and managed closely.”
