Business confidence has risen significantly in the last six months according to the latest Business in Britain report. The survey, now in its 25th year, offers insights on the recent performance and expectations of domestic businesses. The survey is based on the responses of over 1,500 firms, especially small and medium-sized companies, drawn from all industries and all parts of the country.

The report shows that business confidence has risen since its four-year low following the EU referendum vote. Business confidence has risen significantly from 14% to 24% in the last six months.

Confidence rise is broad based among sectors

Four out of six business sectors have noted higher confidence since January. The biggest rise came from sectors that are primarily driven by UK demand.

The construction sector now has the highest confidence (rising from 20% to 31%). Transport and communications and business and other services also made strong gains.

The two areas that reported a fall still showed confidence well above the lows of last July. Manufacturing fell modestly to 27% from 28% and hospitality and leisure declined to 21% from 28%.

Difficulties in recruiting skilled labour

The improved confidence contrasted with businesses’ views on the difficulties in recruiting skilled labour. The number of companies who said they had experienced difficulty recruiting skilled labour in the last six months increased to a ten year high of 52% compared with 31% in January. This was apparent in all regions and sectors. Despite this, the share of companies expecting to increase average pay rose only slightly.

Improved outlook for export prospects

Companies were more positive about export prospects, which rose to an eighteen-month high. The number of firms that expect higher total exports in the next six months rose to 29% from 26%. Companies were most upbeat about export prospects to North America, followed by the ‘rest of the world’ and Europe.

Capital spending forecasts higher, but cautious

Firms’ capital spending plans improved for a second consecutive survey, but remain cautious for most sectors. This is despite strong profit expectations and a significant fall in economic uncertainty.

Report produced by LLoyds Bank