Business confidence in the UK rose to 39% in October, “a three-point increase, to reach the second highest level in 2023–surpassed only in August (41%),” according to an update shared by Lloyds Banking Group.
The confidence level this month is “significantly above the long-term average of 28% and contrasts sharply with the Barometer reading of just 15% in October 2022, in the weeks af ter the mini-budget.”
As noted in the update from Lloyds Banking Group, businesses also reported “increased trading prospects for the year ahead alongside greater optimism in the economy.”
Firms’ trading prospects were “up this month with 54% (up two points) of businesses anticipating stronger activity in the next 12 months, compared with 10% (down one point) expecting weaker outcomes.” This resulted in the net balance “rising three points to 44% versus 41% in September.”
Optimism about the wider economy also “increased, with 55% (up four points) of firms reporting greater optimism, while 21% (unchanged) were less upbeat.” The net balance therefore “rose four points to 34% compared to 30% in September.”
Pricing insights
The pricing expectations of companies “reached a new high for 2023 in October with a third consecutive monthly increase. Sixty-two percent (up two points) of firms plan to raise their prices with an unchanged 3% planning to reduce them. This results in a net balance increase of two points to 59%.”
Employment insights
Companies’ hiring intentions “increased this month, with the net balance expecting to raise their staffing level up seven points to 32%.” This reversed the seven point fall “in September, with the 32% level equalling the previous high in August 2023.”
The proportion of firms planning “to increase their headcount rose to 48% (up three points), while 16% (down four points) expect to reduce the number of employees.” Hiring intentions continue to remain stronger than “at the start of the year and firms are clear in their desire to prioritise retaining and attracting staff.”
The October Barometer saw predictions “for average wage growth remain elevated, with 31% of firms expecting a pay growth of 3% or higher, while 19% (up one point) anticipate pay to increase by 4% or higher.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said:
“Business confidence this month reflects a more positive outlook as we head into the important festive period, with trading prospects and economic optimism both at their second highest levels this year. The level also underlines the wider upward trend of steadily rising confidence in 2023. If you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and in September an average of 27% in the third. However, our data shows that firms are still safeguarding their profit margins in response to the possibility of interest rates remaining high, wage increase pressures, and the prospect of higher energy prices again this winter. Therefore, businesses will be keeping a keen eye on the forthcoming Autumn Statement and Bank of England policy announcements as they navigate through a challenging economic period ahead.”