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UK business confidence hits new highs

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Business confidence among UK companies has hit record highs, according to a survey by Lloyds Bank Business, with recovery broadening out to smaller businesses and the regions.

Rising expectations for orders, sales and profits in the next six months has seen business confidence reach its highest level since the survey began in 1992. Confidence was seen across all regions in the UK, but the South West, North East and Yorkshire, and East Midlands and East saw particular strength.

In a boost for employment growth prospects, companies also signalled that they plan to boost staff numbers for the second half of 2014. Almost a third of businesses – 31% – said that they will increase staff numbers during the second half of the year. They also plan to increase capital spending, particularly in the construction and manufacturing sectors.

Since the last report in January 2014, the confidence index – which canvasses the views of 1,500 businesses – has increased by 8 points to 53%, which represents the fifth consecutive increase for the survey. The previous survey high was 46%, recorded in January 1994.

The survey also showed that pricing power is returning for many companies, with the balance of firms anticipating greater scope for increasing prices over the next six months increasing 1% to 24%. This is the highest balance since 2008 when it averaged 33%. The net balance of firms expecting rising profits increased for the fifth consecutive survey, to 46%.

There was also optimism on the prospects for exports despite the strength of sterling. The net balance of businesses expecting to increase their exports over the next six months rose by three points to 51%.

Smaller businesses are increasingly confident, with the strongest rise in confidence seen among businesses with turnover of less that £1m. The strongest absolute levels of confidence were for firms in the £2-5m and above £15m turnover brackets, both at 58%.

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