Business confidence on the up

Confidence amongst British businesses rose for the second month in a row in April, with firms’ optimism in trading prospects and in the wider economy both coming off recent lows, according to the latest Lloyds TSB Corporate Markets Business Barometer.

The survey shows that more than a third (35 per cent) of firms are expecting brighter trading prospects over the coming twelve months, while only a fifth (21 per cent) anticipate worsening conditions.

In March, by comparison, only a fifth (22 per cent) of firms expected business to improve and a quarter (26 per cent) were prepared for a fall. This confidence boost means that the balance for April (the positives minus the negatives) shot up to 14 per cent – the highest level since November 2008.

Businesses are also increasingly hopeful about the general economic outlook for the UK. The overall business confidence balance, reflecting firms’ perceptions of the wider economy, has risen to 11 per cent – a leap of 27 per cent since March. This represents the highest balance since November 2007. Looking at the breakdown, 45 per cent of firms are more upbeat about economic prospects, while 34 per cent were increasingly gloomy.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “Confidence is a vital ingredient in any economic recovery, so the fact that businesses seem to be regaining faith in their own trading prospects and in the economy as a whole, can only be good news.

“With confidence rising, there is room for hope that the pace of decline could be slowing and that the recession may be bottoming out. But we should be careful not to read too much into this. We’re still very much in the throes of a downturn, and that means businesses could continue to see tough trading conditions for some time.”

Across the sectors, the survey indicates that services and distribution firms are particularly confident about overall economic prospects. The confidence balance for the service sector rose to 14 per cent – a 31 per cent increase on the previous month, and the highest level since November last year. Meanwhile the balance for distribution businesses shot up 25 per cent to 31 per cent – the highest percentage balance in 12 months.

The survey also shows a universal rise in confidence levels across the regions. The balance of firms expecting to do more business over the next twelve months rose to 16 per cent in the Midlands, 14 per cent in the North and 11 per cent in the South.

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