Lloyds Bank’s latest Business Barometer has found that business confidence remains high, with March’s figures unchanged month-on-month at 42%.
In a promising sign of a return to economic growth, this month’s survey data reflects the continued confidence firms “have demonstrated so far in 2024 and means the overall business confidence level remains well above the survey’s long-term average of 28%.”
The Barometer – which measures businesses’ overall confidence by assessing their trading prospects and optimism for the economy – also found “that results for these metrics remained at historically strong levels.”
The net balance for firms’ trading prospects “was unchanged at 49%, the second-highest level since 2017. A further 59% of firms (up from 57% last month) signaled stronger activity for the year ahead, while 10% predicted lower output (up from 8%).”
Results for economic optimism improved, “increasing by 1 point to 35%. This accounted for 56% of businesses who felt more positive about the economy (up from 54%) compared to 21% of businesses who felt less positive.”
It should be noted that most of this month’s survey results “were collected before official GDP data revealed monthly GDP growth of 0.2% in January.”
One factor driving the sustained confidence overall “is businesses’ reduced concern about supply chain disruption. Following disruption to international shipping routes, businesses had previously expressed concern regarding the cost of and ability to do business.”
However, these concerns have eased in recent months “meaning overall business confidence now matches the highest level seen in 2023 (42%).”
Elsewhere, firms’ staff growth expectations “remained positive albeit slightly down from last month’s high.”
Overall, 46% of businesses said they expect “to increase their workforce (down from 49%), while 19% plan to reduce their headcount (up from 13%).”
The smallest firms – those “with fewer than 10 employees and a turnover above £250,000 but below £1m – were the least likely, on balance, to plan to hire new staff.”
The resulting net balance fell “to 27% from 36% last month, which is still above the long-term average of 22%. Businesses of all sizes also reported labor shortages this month.”
The survey’s figures for average wage growth “could potentially indicate a gradual decrease in pay growth in the months ahead.”
The share of firms saying they expect “to award 3% or more pay increases in the next 12 months fell slightly to 33% from 35%.”
In terms of pay in the past 12 months, there is further evidence of “a downwards trend with the proportion of firms reporting 3% or more increases falling for the third month in a row (32%).”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking said:
“With businesses reporting 42% confidence in March, this month’s figures maintain the recent improvement bringing a positive end to the first quarter of the year. Firms are showing increasing resilience which is reflected in their easing concern about supply chain disruption and energy prices. Businesses also continue to signal optimistic hiring intentions, although slightly down on previous months. It’s possible the impending minimum wage rises in April are beginning to come into sharper focus for businesses – especially smaller firms.”
As noted in the update:
“Among the regions there was a mixed picture. Following unusually low confidence in February, London bounced back with a 14-point increase to bring the capital back in line with typical figures reported for the area, although the greatest confidence was shown by businesses in Yorkshire & the Humber who reported a 29-point rise, making it the most confident region overall. However, businesses in the Midlands saw a significant fall which seems to be an outlier compared to recent results. Overall, the Barometer across the quarter suggests that we could begin to see more optimistic economic growth in 2024 than seen in recent years, although medium-term challenges remain.”