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Brexit fears fail to dampen business confidence

31st May 18 8:00 am

According to Lloyds

Overall business confidence – an average of business prospects and economic optimism – increased by 3 points to 35 per cent in May, the strongest level for four months. That was consistent with a more positive outlook for hiring. The net balance of firms expecting to increase their staff levels in the coming year increased by 5 points to 30 per cent, which was also a four-month high. Forty-six percent (up from 41 per cent) anticipated a rise in their headcount, while 16 per cent (unchanged) expected a reduction. The share of firms expecting their average pay growth to rise by more than 2 per cent in the next twelve months was steady at 40 per cent.

Business prospects for the year ahead were the strongest since January. A net balance of 39 per cent of firms in May, up from 31 per cent last month, anticipated stronger prospects. In all, 50 per cent (up from 44 per cent) foresee a rise in their activity, while 11 per cent (down from 13 per cent) expected a fall. The improvement in business prospects was partially offset by a slight fall in the net balance of firms reporting greater optimism about the wider economy, which fell by 2 points to 30 per cent. Just over half (51 per cent) of firms, unchanged from last month, said that they were more optimistic about the economy than three months ago, while 21 per cent (up from 19 per cent) were less optimistic.

The net balance of the expected impact of Brexit on business activity remained slightly positive, but it was at the highest level this year. Thirty-five percent (up from 31 per cent) of firms anticipated a positive impact, while 28 per cent (up from 27 per cent) expected a negative impact.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking commented:
“Business confidence is rising and firms appear to be brushing off the economic slowdown in the first quarter, with levels hitting a four month peak in May. As negotiations enter a critical stage, it’s interesting to see 35 per cent of firms anticipate Brexit will have a positive impact on their business activity.”

Overall confidence bounced back strongly for the retail sector, rising by 23 points to 38 per cent. Manufacturing confidence, however, fell by 7 points to 33 per cent. Confidence levels in both these sectors have converged near to the national (all-sector) average. Transport confidence also fell, but it remained above average at 43 per cent. Business and finance also recorded strong confidence at 43%, but communications was ranked at first place with 50%. Weakest confidence was in the mainly public sector at 21%.

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