UK business optimism at six-month high despite recession risk

THE gloom shrouding the UK economy is beginning to lift, despite more signs that activity declined at the start of 2023, surveys on Monday (Jan 30) showed.

Growing hopes of a brighter economic outlook and cooling price pressures boosted business confidence to a six-month high in January, according to Lloyds Banking Group’s monthly business barometer.

Confidence indicators have been sending conflicting messages over the state of the economy as forecasters warn that the UK is likely heading into recession in the first half of 2023.

That picture was reinforced by a separate survey by the Confederation of British Industry, which showed private-sector activity fell over the winter due to a cocktail of headwinds, including strikes, staff shortages and the cost-of-living crisis.

Its business volumes indicator slumped from -1 to -13 in the three months to January amid further weakness in services.

However, optimism is being fuelled by evidence that inflation has peaked as energy costs ease. Lloyds said confidence rose by five points to 22 per cent, with firms’ expectations for their own prices moderating from the record high hit in December.

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“It is still a tough environment for businesses, with high energy bills remaining a concern during the winter months, but there are grounds for optimism for 2023 if inflation starts to trend lower,” said Hann-Ju Ho, an economist at Lloyds Bank Commercial Banking. BLOOMBERG