Lloyds: Economic optimism reaches 18 month high

Jessica Nangle

January 30, 2020

Economic optimism reached an 18-month high to 23% according to Lloyds Bank latest Commercial Banking Business Barometer.

Firms concerns about the expected impact of the UK leaving the EU was also the least negative since November 2018.

Confidence increased in 10 out of 12 regions, with London being the most confident and Scotland being the least.

Overall business confidence rebounded in construction and services but saw a slight decrease in the manufacturing sector.

Overall business confidence is calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy.

January saw a rise in trading prospects, increasing four points to a seven-month high of 22%.

The buoyed outlook continued to be reflected in firms’ assessment of their own hiring intentions, which rose a further three points to 15%, the highest since December 2018.

The proportion of firms expecting higher staffing levels remained unchanged, with a third of businesses (34%) expecting to increase employment.

Those anticipating a reduction decreased by three points to 19%.

Businesses’ views on the impact of leaving the EU remain divided, with 27% of businesses believing the UK’s exit will have a positive impact whilst 34% continue to expect a negative impact.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “After a turbulent 2019, it is encouraging to see a solid rise in overall business confidence to start the new decade.

“These results, if sustained, could signal a stronger economic growth at the start of 2020, although risks to the central outlook remain.”

Confidence in the retail sector increased by two points to 24%, whilst the manufacturing sector saw a decrease of six points to 21%.

Paul Gordon, managing director for SME and mid-corporates at Lloyds Bank Commercial Banking, added: “It is hugely encouraging to see a significant increase in business confidence for firms up and down the UK. London had a particularly strong start to the year, which could be businesses’ positive reaction to greater political and economic certainty.

“It is also encouraging to see both the South West and East of England posting significant strides.

“However, Scotland saw a sharp decline, moving the region into negative sentiment.

“The overall buoyed results are also reflected by improvements in three of the four sectors and we hope that more businesses plan for growth as we continue into 2020.”

Chirag Shah, chief executive at Nucleus Commercial Finance, said: “While many SMEs are still sceptical about the state of the UK after we leave the EU tomorrow, there’s clearly been a post-election bounce in business confidence.

“Many SMEs now have more clarity following December’s General Election and we’re already seeing more business owners be bold in their plans at the start of 2020.

“With more clarity than we’ve had in the last three years, it’s now time for the government to deliver on its promises to support SMEs and help stimulate local economies.”

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