UK business confidence steady at almost nine-year high in August

UK business confidence remained at an almost nine-year high in August, a closely-watched survey has suggested, in a positive sign for the country’s economic prospects.

Lloyds Bank’s Business Barometer put overall business confidence at 50 per cent this month, unchanged from July and the highest level since November 2015.

The reading was well above the long-term average of 29 per cent, which it has remained above for the last 15 months.

The survey suggested that positive sentiment among firms about their output expectations was broadly steady. Trading prospects ticked down two points from July to 54 per cent, although this figure is still the second-highest recorded so far this year.

Output expectations for each sector remained at or close to three-year highs. Construction experienced the biggest increase with a 14-point jump to 58 per cent.

Meanwhile, manufacturing dropped two points to 58 per cent. Retail and services fell seven and three points respectively, to 53 per cent.

Businesses’ optimism about the economy as a whole rose two points to 47 per cent, continuing the upward trend recorded throughout 2024.

“As in July, we’ve seen a particularly strong outcome for business confidence,” said Hann-Ju Ho, a senior economist at Lloyds.

“Official GDP data for the first half of this year was encouraging and the survey results indicate that solid economic performance will likely continue as we move into the second half of the year.”

Latest figures from the Office for National Statistics show the UK economy grew 0.6 per cent in the second quarter of the 2024, continuing its strong rebound from last year’s shallow recession.

Falling inflation also gave the Bank of England confidence to cut interest rates for the first time since March 2020 at the start of this month.

Lloyds’ survey suggested good news on inflation. Firms’ price expectations decreased for the second time in three months, with 58 per cent planning to raise prices in the next year – down from 60 per cent in July.

Meanwhile, four per cent of firms planned to lower prices – up from three per cent. The net balance between these two figures dropped three points to 54 per cent, marking the second-lowest reading in 2024.

Wage growth expectations ticked up in August, with the share of businesses expecting pay growth of between three and four per cent coming in at 52 per cent, from 46 per cent in July.

The reading signals a more restrictive labour market, although 2024 has more broadly seen a downward trend.

“On a more cautious note, we have seen wage growth expectations pick up this month, although not enough to negate the downward trend so far in 2024,” Ho commented.