UK business confidence makes strongest rebound since April 2021

UK business confidence rose at the fastest rate in 20 months as labour market pressures showed signs of easing, the festive trading period exceeded expectations and businesses became more optimistic about the outlook for the economy. Lloyds Bank’s said its measure of sentiment among British firms rose to 17 per cent in December, up from 10 per cent in November. It was the highest reading since July and the fastest monthly rise since April 2021. The findings mark a sharp contrast with other industry surveys and official statistics suggesting retail sales tumbled in recent weeks as transport strikes made it more difficult for people to get to city centres. Purchasing managers are bracing for a protracted slump, according to a report by S&P Global last week. Firms in the Lloyds survey reported an improvement in trading prospects, though inflation and the risk of an economic downturn still tempered their optimism. Executives also reported growing wage expectations — bad news for the Bank of England as it battles to tame double-digit consumer price inflation. More firms said they expect to increase prices next year. Sentiment among manufacturing companies improved for the first time in seven months, registering a nine point increase to 13 per cent, while construction and services also ticked up. Lloyds said that, despite challenges facing the UK economy, businesses were expecting a better festive period than they’d had in 2021. Firms based in London were among the least confident of those surveyed. In contrast with regions in northern England, where the rebound in confidence was most pronounced, businesses in the capital became more pessimistic in December compared to the previous month. Overall, business confidence still remains well below levels seen a year ago, when consumer demand enjoyed a strong post-pandemic rebound and borrowing costs were low. Lloyds’s survey was done from Nov 28 to Dec 12 and counted 1,200 UK companies across all industry sectors and regions. BLOOMBERG