Business confidence rebounded rapidly in February, according to a new survey, with firms increasingly optimistic about the health of the economy.
Firms also reported that they were significantly more likely to hire new workers than the previous month, suggesting the Budget blow to the labour market may be less than feared.
“The findings of the latest Business Barometer are encouraging, showing a significant uplift in business confidence and economic optimism across the UK,” Paul Kempster, head of relationship management at Lloyds Commercial Bank said.
The headline business confidence index increased by 12 points in February, taking it to 49 per cent. This was the highest level since August and significantly above the long-term average.
The improvement was mainly driven by growing economic optimism, which rose by 18 points, the largest monthly increase since late 2020.
The survey also suggested that hiring activity will remain strong in the coming months, despite April’s looming increase to employers’ national insurance.
Hiring intentions increased by nine points to 41 per cent in February, with firms citing hiring and up-skilling as their biggest growth opportunity over the next six months.
Hann-Ju Ho, senior economist at Lloyds Commercial Bank, said the survey demonstrated the “resilience” of UK businesses despite higher costs and significant economic uncertainty.
“Increased optimism, along with an expected uplift in trading prospects, is prompting businesses to invest in growing and upskilling their workforce, putting them in a prime position to capitalise on increased demand and drive future growth,” he said.
The survey included responses from 1,200 businesses around the country and offers a more optimistic assessment of the labour market than some other indicators.
A report from the Chartered Institute of Personnel and Development suggested that more firms are planning job cuts in the next quarter than at any time in the last decade, excluding the pandemic.
Lloyds’ survey will raise hopes that the most recent run of economic data, which has come in ahead of expectations, could mark a turning point for the UK economy after a dismal end to 2024.