Business confidence slipped marginally in February, but overall confidence remains robust supporting the view the UK economy has passed the worst.
Despite falling into a shallow recession in the second half of last year, business surveys have pointed to an upturn at the beginning of the year.
Lloyds Business Barometer, which measures business confidence, remained well above historical levels in February despite falling slightly compared to January.
Overall firm confidence, which combines firms’ expectations for the economy as a whole as well as their own trading prospects, fell to 42 per cent in February, down from 44 per cent in January but well above the long-term average of 28 per cent.
Business confidence in the manufacturing and construction sector drove the monthly fall, with the service sector remaining optimistic about the year ahead.
Reflecting buoyant confidence, expected staffing levels increased to a two-year high. 49 per cent of firms said they expect to take on more staff compared to just 13 per cent who expected to reduce headcount.
Pay growth also seems to be falling gradually in a boost for rate-setters at the Bank of England, although the pace of this fall appears to be gradual.
“For the second consecutive month we’ve seen businesses display a level of confidence that sets a positive outlook for the year ahead,” Paul Gordon, managing director for relationship management at Lloyds said.
“It’s also very encouraging to see that businesses are keen to hire more staff – great news for the UK overall. With more businesses open to hiring, more people can get into work, providing a boost to the UK economy,” Gordon continued.
After a slow 2023, falling inflation, lower interest rates and strong wage growth are expected to improve the UK’s prospects in 2024.
Households may also get a boost from the Spring Budget next week, when Chancellor Jeremy Hunt is expected to deliver another small round of tax cuts.