Business confidence has climbed to its highest level since before the Brexit referendum, according to a closely watched survey, as firms grew increasingly optimistic about the state of the economy.
Lloyds’ Business Barometer showed that business confidence increased by eight points in May to hit 50 per cent, the highest level since November 2015.
Rising confidence in May reflected both increasing optimism in firms’ own trading prospects, which rose nine points to 54 per cent, as well as a more hopeful assessment of the wider economy.
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Confidence in the economy as a whole rose seven points to 46 per cent, its highest level since before the Russian invasion of Ukraine.
Hann-Ju Ho, senior economist at Lloyds, said the results “highlight a notable improvement in business confidence.”
The survey was conducted during the first two weeks of May, a period which coincided with the surprisingly strong first quarter GDP figures. The figures showed that the UK grew 0.6 per cent in the first quarter, comfortably outperforming expectations.
Inflation has also fallen much faster than anticipated. Last week the headline rate of inflation fell to just 2.3 per cent, its lowest level in nearly three years. Wage growth, however, continues to remain strong.
With wages continuing to rise faster than prices and the Bank of England likely to cut interest rates this summer, many economists expect households to receive a healthy boost in disposable income.
This could pave the way for a healthy recovery from last year’s shallow recession, driven by consumer spending.
There were some more worrying indicators regarding inflation. 63 per cent of firms reported that they intended to raise their prices compared to just two per cent who thought prices would fall.
The survey noted that businesses were looking to “rebuild their profit margins against the backdrop of falling energy prices and inflation.”
Business confidence also increased in London, rising by 12 points. Firms in the capital cited investment in sustainability as their top priority for growth over the next six months.