Significant rise in UK business confidence
Business Barometer for September shows:
* Significant increase in firms’ optimism over their production levels
* Greater confidence in overall UK economy
* Expectations among distribution and services companies improve despite rising fuel costs
Business confidence has risen markedly during the last month, with 56 per cent of UK firms forecasting an increase in business activity — up from 48 per cent in August, according to the latest Lloyds TSB Financial Markets Business Barometer. Only four per cent of businesses expect their own activity levels to decline and a further 36 per cent expect to maintain the status quo.
When asked about their confidence in the UK economy in general, the balance of firms feeling optimistic rather than pessimistic has risen from +4 per cent to +13 per cent. This is a significant improvement but still well below the survey’s average of +18 per cent.
In the service industry, the balance of companies expecting business to improve rather than deteriorate, rocketed from 47 per cent in August to 66 per cent in September, making this the most confident sector. In addition, distribution companies, boosted by the strength of the wholesale and transport and communications sectors, saw business optimism rise from 29 per cent to 51 per cent. Whether the MPC’s decision to hold interest rates rather than cut them will affect this positive sentiment remains to be seen.
Trevor Williams, chief economist, Lloyds TSB Financial Markets, said: "The upward revision of consumer spending from 0.2 per cent to 0.4 per cent, the resilience of corporate profitability despite rising energy prices and the corporate sector’s cash surplus reaching a record high of £9.1bn in Q2 are all factors that suggest the economy could be over the worst."
Trevor Williams continued: "If interest rates stay around their current level, the improvement in business sentiment shown by the survey, combined with significant cash balances to fund investment spending, means a strengthening in business activity and a likely boost to economic growth within the next few months."
