Sentiment among British businesses edged higher in May, except for consumer-facing companies that are most exposed to the growing cost-of-living crunch, a survey showed on Tuesday.
The Lloyds Bank Business Barometer rose in May to 38% from 33% in April, its first increase since February, despite worries about a slowing economy.
Other surveys – like the closely-watched S&P Global Purchasing Managers’ Index (PMI) gauge of business activity – have pointed to a sharp slowdown in the economy in May.
The Lloyds survey brought mixed news on inflation pressures. While the proportion of companies planning to raise prices eased by a percentage point to 57%, pay intentions remained strong.
Some 16% of firms intend to raise pay by 4% or more in the coming year – high by the standards of the Lloyds survey.
Other surveys have shown even heftier pay increases. Human resources data company XpertHR reported half of pay deals offered rises of 4% or more in the three months to the end of April, the highest median pay settlement since 1992.
Morale in the construction and manufacturing sectors improved, but in the retail sector it fell to its lowest since March 2021 when non-essential shops were still shut due to COVID restrictions.
“Business confidence improved this month and firms in general seem able to rebuild some of their margins through price increases,” said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking. “Consumer-facing industries, such as retail, are not feeling the same confidence uplift amid the widespread reports of a squeeze on household incomes.”
Consumer prices rose 9.0% in annual terms in April, the biggest rise since 1982, according to official data published earlier this month.
The Lloyds survey showed the improvement in business confidence was strongest in London.
Lloyds surveyed 1,200 companies with annual sales of at least 250,000 pounds ($316,200) between May 3 and May 17.
($1 = 0.7906 pounds)
(Reporting by Andy Bruce; editing by David Milliken)
