UK Business Confidence Remains Robust as Job Prospects Rise Further: Lloyds Business Barometer

The Lloyds Bank Business Barometer confirms business confidence remained robust and job prospects rose further in June.

The monthly survey of UK businesses showed confidence amongst businesses was unchanged in June at 33% having risen for four consecutive months, consistent with overall expectations for a robust UK economic rebound in 2021.

The findings nevertheless come at an important juncture for the post-lockdown recovery, with other surveys suggesting the pace of the recovery has slowed of late.

Reasons for this slowing include rising cases of Coronavirus and the delay to the final lifting of Covid-19 restrictions from June to July.

Indeed, there was a marginal 1-point fall in optimism regarding the economy to 36% from last month’s five-year high.

"Firms appeared to take stock of the pandemic situation, with hopes that the vaccination progress is helping to limit the health effects of rising Covid-19 cases, particularly of the Delta variant," says the Business Barometer report.

The Business Barometer release comes on the same day the ONS revealed their final revision to first quarter GDP data, embedded in the report was data showing stronger-than-expected levels of household savings being stored up during the first quarter of the year.

This suggests to some economists that a larger-than-expected economic rebound is possible over coming months should those savings be spend.

Indeed, looking ahead, firms are optimistic on the economy's prospects according to the Business Barometer.

Their assessment of their own trading prospects for the year ahead improved for a fifth straight month, reaching 30% (up from 28%) which is its highest level since November 2018.

43% of businesses (up from 42%) report stronger activity and 13% (down from 14%) anticipating weaker conditions.

"Although we must now wait slightly longer for the last remaining COVID-19 restrictions to ease, it’s an encouraging sign that firms continue to have strong overall confidence in the outlook for the UK economy, as well as their expectations for their own growth prospects," says Hann-Ju Ho, Senior Economist at Lloyds Bank Commercial Banking.

Looking at the employment situation, there are some positives to be taken with the net balance of firms anticipating higher employment in the year ahead climbing for a fifth month, up 3 points to 17%, its highest for two-and-a-half years.

34% of businesses (up from 32% previously) expected to increase their workforce, while 17% (down from 18%) anticipated a lower headcount.

Despite improving staffing prospects, pay expectations appear to have broadly stabilised in the past two months.

The Business Barometer finds overall pay pressures have increased over the past year, but they remain below pre-pandemic levels.

Pricing expectations for the goods and services provided by those businesses survey increased for a fifth month to an eighteen-month high, consistent with widespread evidence of a post-lockdown surge in inflation.

The net balance of surveyed businesses expecting to increase their prices rose 3 points to 36%, with 40% (up from 38%) anticipating higher prices and 4% (down from 5%) predicting lower prices.