Business confidence back to levels before war in Ukraine



Falling inflation and speculation that interest rates have peaked have boosted business confidence back to levels not seen since before the onset of the energy crisis caused by the war in Ukraine, according to new research.

An index compiled monthly by Lloyds bank, tracking optimism among British companies, climbed by three points to a net balance of 42 per cent this month — the highest level since February 2022, which was when Russia invaded Ukraine and fuelled inflation by causing energy prices to rise.

Sentiment among businesses has been bolstered by confidence in their own trading prospects, which rose by four points month-on-month to a net balance of 48 per cent, the highest reading since December 2017, Lloyds said. Executives are also becoming more positive about the health of the wider economy, with a gauge of economic optimism rising by three points to a net 37 per cent.

This confidence is feeding through into recruitment plans for the coming year, with a measure of hiring intentions compiled by Lloyds reaching its highest level for 18 months.

The brighter picture painted by the Lloyds Bank business barometer is a contrast to the recent gloomy picture describing the British economy. Many households and businesses have come under pressure since late 2021 as they have wrestled with surging inflation and a sharp rise in interest rates, as the Bank of England tried to contain prices.

While inflation fell from a 41-year high of 11.1 per cent in October last year to 4.6 per cent last month, Bank officials have signalled that rates are likely to remain at elevated levels for a prolonged period if inflation is to return to its 2 per cent target. There is optimism, however, that the Bank will not be announcing any further rate increases.

The Lloyds research involved an online survey of 1,200 companies across industries between November 1 and November 15, before the chancellor’s autumn statement last week.

Its findings underline the stubbornness of inflation, with the net balance of companies planning to lift prices in the coming year reaching a new high of 61 per cent, up two points month on month. Yet Lloyds found that expectations for average wage growth in the next year were “broadly stable”.

Hann-Ju Ho, senior economist at Lloyds commercial banking business, said: “It’s encouraging to see signs that wage expectations may be stabilising, even against the backdrop of hiring intentions increasing to an 18-month high.

“Price indicators in the survey are similarly up, with our data continuing to show that firms are still safeguarding their profit margins in response to past rises in interest rates, wage increase pressures, and the prospect of higher energy prices again this winter.”





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