The improvement adds to a broader run of data pointing to a firming UK growth backdrop, with businesses citing stronger customer demand and greater confidence in their own trading outlook as key drivers. The notable fall in pricing intentions, now at their lowest since 2022, is the detail most likely to draw attention from rate setters, as it suggests some easing in the inflationary pressure businesses expect to pass through over the coming year. Taken together, the survey points to a more constructive investment and growth environment without an accompanying pickup in price setting behaviour, a combination that could support a more comfortable policy backdrop if sustained.
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British businesses are feeling more confident and less inclined to raise prices, a combination that bodes well for both growth and the inflation outlook.
Summary:
Lloyds’ monthly business confidence index rose 4 points in August to +53%, above its 12-month average of +47%, marking the highest reading since March.Optimism about the wider economy rose 7 points to +49%, well above its 12-month average of +37%.Businesses’ own trading outlook rose 2 points to +58%, slightly above its 12-month average of +56%.The percentage of firms planning to raise prices over the next 12 months fell 3 percentage points to 51%, its lowest level since 2022.Lloyds attributed the improvement to stronger customer demand, greater optimism about the wider economy, and growing confidence in firms’ own trading prospects.
British businesses grew more confident this month than at any point since March, according to a survey from Lloyds bank, adding to a growing body of evidence pointing toward an improving economic outlook. The bank’s monthly business confidence index rose 4 points in August to +53%, comfortably above its average of +47% over the past 12 months.
The improvement was broad based across the survey’s components. Optimism about the wider UK economy climbed 7 points to +49%, well ahead of its 12-month average of +37%, marking one of the sharper monthly gains within the report. Businesses’ confidence in their own individual trading outlook also rose, up 2 points to +58%, slightly above its 12-month average of +56%, suggesting firms are feeling more assured not just about the broader economic backdrop but about their own prospects within it.
Lloyds said the gains reflected businesses reporting stronger customer demand alongside greater optimism about the wider economy and growing confidence in their own trading outlook, all factors the bank said would help support investment and growth plans going forward. The alignment between improving sentiment on the macroeconomic picture and improving sentiment on firms’ own trading conditions points to a more self-reinforcing type of confidence gain, rather than optimism driven by a single narrow factor.
Perhaps the most notable detail within the survey concerned pricing intentions. The percentage of firms planning to raise prices over the next 12 months fell 3 percentage points to 51%, its lowest level since 2022. That decline suggests businesses are seeing less need to pass through cost pressures to customers, even as their confidence in demand and trading conditions improves, a combination that would typically be viewed favourably from an inflation perspective.
Taken together, the August reading extends a period of improving sentiment among UK businesses and aligns with other recent indicators suggesting the broader economy is on a firmer footing. The combination of rising confidence alongside cooling price rise intentions offers a relatively encouraging signal for policymakers weighing the balance between supporting growth and managing inflationary pressure, with businesses appearing to feel more confident about the demand environment without needing to lean as heavily on price increases to protect margins.
This article was written by Eamonn Sheridan at investinglive.com.