UK business confidence has jumped as firms anticipate the lifting of lockdown restrictions later this month, despite concerns over the rise in Covid-19 infections.
A survey by accountancy and business advisory firm BDO found that firms were their most optimistic since 2005 in June. Manufacturing optimism rose sharply, due to improved global economic outlook driven by the Covid-19 vaccine rollout this year.
“Businesses are clearly looking forward to the lifting of restrictions on the 19 July. After a gruelling year of unpredictable change, the ending of restrictions is timely, although rising Covid-19 cases still leave an element of uncertainty,” said Kaley Crossthwaite, partner at BDO.
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Companies also reported that inflation pressures had hit a four-year high, with supply chain disruption due to Brexit, the pandemic, and the Suez Canal blockage earlier this year pushing up costs.
Two-thirds of UK private sector firms expect an increase in business activity over the coming year, according to a poll of 1,400 businesses by Accenture and IHS Markit UK. Just 9% predicted a fall, giving the highest business expectations reading in six years.
Hiring intentions among businesses rose to a record high, as firms anticipated a robust recovery. But some firms fear recruitment plans could be hindered by a lack of available labour, particularly in sectors that rely on a large pool of EU workers.
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“Despite continued uncertainty, it is hugely encouraging that confidence remains high among British businesses,” said Rachel Barton, strategy & consulting lead at Accenture UK & Ireland.
“However, the most positive signal is that the confidence appears to be translating into action, with companies now hiring and investment plans at a high point.”
Firms are also expecting to raise wages, with a balance of +70% of firms anticipating rising staff costs. Many also plan to pass this on to customers, with a record net balance of +48% of businesses plan to raise their selling prices. That could push consumer price inflation higher over the coming months.
