UK Businesses Continued Positive Start to 2024 – Report

Businesses continued their positive start to the new year, Lloyds Bank’s latest Business Barometer has found.

The Barometer – which measures businesses’ overall confidence “by assessing their trading prospects and optimism for the economy – found that while overall confidence dipped slightly to 42%, businesses are looking to hire new staff members and retain their existing employees.”

These findings broadly echo “the renewed optimism reported by businesses in recent weeks, highlighting an increased level of confidence in their prospective outputs over the next 12 months.”

Overall business confidence dipped “marginally in February to 42% – down from 44% in January – but remains strong in relation to previous figures.”

Contextually, the long-term average “for business confidence currently sits at 28% and with this month’s figures standing significantly above that, there are still strong signs of positive sentiment from businesses.”

Similar results were reported in relation “to trading prospects and the broader economy.”

Although confidence in trading prospects “slipped two points to 49%, falling from January’s 51%, this is still the second-highest level since April 2017.”

Meanwhile, more than half (54%) of businesses “reported higher levels of optimism compared to the proportion of businesses who felt pessimistic about the economy which was unchanged at 20%.”

These results leave the net balance “down three points at 34% – still in positive territory.”

Some businesses continued to “express concerns about inflation and interest rates, although these concerns have eased significantly in recent months.”

February’s survey data was “collected in the aftermath of the attacks on Red Sea shipping lanes, resulting in some businesses also expressing concern about supply-chain disruption.”

Almost half (49%) of businesses surveyed said they “expect to take on more employees in the year ahead. Conversely, only 13% expected to reduce headcount over the same period – the lowest reported figure since 2017.”

Respondents also tentatively signalled that labor shortages may “have reduced in recent months, suggesting increased capacity to accommodate stronger demand.”

As a result, the net balance has “increased by 3 points to 36%, which means expected staffing levels have risen to the highest level since May 2022.”

The Barometer also found “that pay growth is falling gradually, although the pace of this fall appears to be gradual rather than swift.”

Indicators of pay growth within the Business Barometer survey have “been elevated since the end of the furlough scheme in 2021.”

However, there are now “signs of stabilisation at the higher thresholds.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking said:

“This month’s data still reflects a positive mood among businesses despite a marginal fall in overall confidence. Firms appear to be upbeat about their prospects and the economy, supporting their positive staffing expectations.”

As noted in the update:

“Looking at the sectors, there is a mixed picture. There was a slight fall in confidence reported in the manufacturing and construction sectors, while retail and services stood their ground – remaining unchanged compared to January’s figures. But despite the manufacturing and construction fall, businesses are still showing high levels of confidence.”

The report also mentioned that the split across the regions “provides reason to view the dip in confidence at the broader UK level cautiously.”

Six regions have reported “an increase in confidence while the other six have reported a decrease. So, scratching the surface, we see a story that continues to show a more positive outlook for the year ahead.”


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