Overall business confidence in the United Kingdom increased in January for a fifth consecutive month, rising 13 points to 23%. At the same time, economic optimism surged to 23% from 2%, an 18-month high.

Overall business confidence surged in January, according to the first Lloyds Bank Commercial Banking Business Barometer in 2020.

The survey, the first to be taken after the December General Election, shows the 13-point increase took business confidence to 23% in January. This is a 14-month high and rising back towards the long-term average of 25%.

chart1 - UK: Business confidence hits 14-month high

The boost was largely driven by firms reporting an improvement in economic optimism, which leapt to 23% from 2%, the highest for a year and a half.

Overall business confidence is calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy.

January saw a rise in trading prospects, increasing four points to a seven-month high of 22%.

The buoyed outlook continued to be reflected in firms’ assessment of their own hiring intentions. That estimate showed a further increase of three points to 15%, the highest since December 2018.

The proportion of firms expecting higher staffing levels remained unchanged. A third of businesses (34%) still expect to increase employment. Those anticipating a reduction decreased by three points to 19%.

Divided views on impact of Brexit

Concerns about the UK leaving the EU eased significantly this month. Business Barometer showed an eight-point increase to minus 7%, the least negative since November 2018.

Businesses’ views on the impact of leaving the EU remain divided. 27% of businesses believe the UK’s exit will have a positive impact (up from 24%). 34% (down from 39%) continue to expect a negative impact.

Chart2 300x248 - UK: Business confidence hits 14-month high

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

“After a turbulent 2019, it is encouraging to see a solid rise in overall business confidence to start the new decade. These results, if sustained, could signal a stronger economic growth at the start of 2020, although risks to the central outlook remain.”

Confidence across regions and sectors

Ten out of twelve regions recorded a rise in overall confidence this month. London was the most confident region (38%), rising 22 points, followed by the South West (34%).

The East Midlands (31%), the North West (26%) and Northern Ireland (25%) were also above the UK average of 23%. Scotland was the least confident region with a decrease of 15 points to -4%, moving it into negative sentiment.

In January, overall business confidence saw a marked improvement in the construction and services sector. Construction increased 15 points to 27%, while services increased 17 points to 21%.

Confidence in the retail sector increased by two point to 24%. The manufacturing sector saw a decrease of six points to 21%.

This survey was conducted with 1,200 companies between 2-16 January from all sectors and regions of the UK.