UK business confidence at four-year high, but staff shortage is cause for concern | Economic recovery

UK business confidence has peaked in four years, thanks to growing optimism about the post-Covid recovery, but companies have highlighted concerns about staff shortages, which could push wages up in the coming months .

The vaccine rollout, the removal of lockdown restrictions and changes to self-isolation rules all contributed to greater optimism among businesses in August, according to the latest snapshot from Lloyds Bank.

The sentiment rebound in August was widespread across the UK, with nine of 12 regions and countries reporting improving confidence, particularly in the North West. It comes as more companies prepare to welcome their staff to construction sites and offices in September after a relatively successful deployment of the Covid vaccine across the country. Growth in trust was strongest in the service sector, with businesses such as bars, restaurants and hotels seeing customer returns.

Hann-Ju Ho, senior economist at Lloyds’s Business Banking, said the numbers told “a positive story about the country’s economic recovery … Staff shortages remain a challenge, but as the economy returns to previous levels pandemic, we can be optimistic that the momentum of business confidence and economic optimism can be sustained in the months to come. ”

The bank’s business barometer showed that overall confidence rose six points to 36% in August, marking its highest level since April 2017 and offsetting a slight drop in July. Optimism about the state of the economy also rose for the first time in three months, up six points to 38%.

The survey also tracked a seven-point increase in the proportion of companies expecting stronger business activity in the coming year to 48%.

The figures follow a rebound in UK growth in the second quarter, when GDP rose 4.8% as lockdown measures introduced to tackle the Covid-19 pandemic were relaxed. However, the economy was still 4.4% lower than in the last three months of 2019.

The Lloyds survey of 1,200 companies in August found companies were unsure of the prolonged labor shortage, with the survey also showing that only 18% expect to increase headcount, according to last month’s reading.

A growing number of companies have started to raise wages to try to attract staff, especially truck drivers, after a drop in the number of available workers strained UK supply chains and left some retailers and restaurants – including McDonald’s, Nando’s and KFC – are struggling to maintain inventory. and serve customers. The job crisis has been blamed on Covid as well as post-Brexit immigration policies which have made it more difficult for foreign workers to obtain visas in the UK.

The Lloyds barometer showed that a third of companies expect wages to increase by at least 2% over the next 12 months. Around 17% of companies expect wage growth to exceed 3%, a record high since the question was first asked in the survey in 2018.

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Most parts of the UK saw increases in confidence, with the North West increasing 26 points to 64% in August and the East of England increasing 14 points to 39%. The two registered their highest levels of trust since the poll was enlarged in 2018. Northern Ireland, meanwhile, fell into positive territory after increasing significantly from -6% in July to 18% in August.

The biggest monthly rise in confidence came in the service sector, rising eight points to 36%, thanks to the easing of Covid restrictions. This is the highest level since January 2018. Confidence in construction and manufacturing has also strengthened, each increasing by seven points to 40%, despite supply chain disruptions. Retail struggled to achieve comparable gains, rising two points to 34%.

Meanwhile, figures released on Monday showed corporate sentiment in the eurozone fell in August, which some analysts attributed to fears about the Delta variant. “With expectations of a fall resurgence of the virus, stricter corona measures pose a significant risk to the outlook,” said Bert Colijn, senior economist at ING.