Business confidence among UK firms climbed to its highest level since March, rising four points in August to 53 per cent, according to the latest Lloyds Business Barometer. The reading is the strongest since hostilities broke out in the Middle East and sits above the 12-month average, as resilient consumer demand offsets the impact of the Iran conflict and reduced Budget speculation.
Optimism about the broader economy also increased sharply, jumping seven points to 49 per cent. The survey found that 64 per cent of business leaders feel upbeat about the state of the UK, while only 15 per cent expressed pessimism.
Lloyds survey highlights stronger demand and easing cost pressures
Amanda Murphy, chief executive of Lloyds' commercial arm, said: "Businesses are reporting stronger customer demand, greater optimism about the wider economy and growing confidence in their own trading outlook." She added that while firms continue to operate in a challenging environment, easing cost pressures and fewer companies expecting to raise prices in the coming year should allow them to focus more on pursuing growth.
The confidence surge comes despite the Iran campaign by Donald Trump entering its sixth month. The Strait of Hormuz, a critical shipping corridor for oil and gas trade, has remained closed to most petrochemical exports throughout the conflict, pushing up energy prices and disrupting supplies of essential commodities such as fertiliser.
Energy price rises and inflation concerns persist
Researchers attributed the stronger confidence to buoyant consumer demand, which has stayed resilient despite elevated energy prices and the threat of a renewed inflation surge. On Wednesday, regulator Ofgem confirmed that household energy bills will rise by up to four per cent from October, reaching their highest level in three years.
Brent crude has risen by more than 40 per cent since the start of the year. Price increases have been particularly sharp in refined oil products such as diesel and kerosene, used as jet fuel, with costs virtually doubling overnight following the first strike on Iran.
Trading outlook improves but price expectations remain high
The barometer showed companies' trading outlook rose two points to a three-month high of 58 per cent, with two thirds of firms anticipating an increase in output over the coming year. The proportion of businesses expecting to raise prices in the next 12 months fell by three per cent to just over half.
Business confidence has strengthened across several closely monitored surveys, marking a departure from previous summers when widespread Budget speculation eroded private sector morale and dampened investment. New Chancellor John Healey has so far kept a tight lid on speculation about which taxes may increase at his first fiscal event in October, despite the broader financial picture pointing towards a higher overall tax burden.
