UK business confidence has rebounded to its strongest level since 2015

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The EU referendum sent the net balance of optimism to a four-year low of 39 per cent, but now the index has rebounded to 52 per cent, comparing favourably with other developed markets, data released today by the Markit UK Business Outlook Survey said. Values above zero indicate optimism for the coming 12 months, City AM reports.

The sharp rise in the headline index was the largest of any country monitored by the survey except the US.

Around 12,000 manufacturers and service providers surveyed said a resilient domestic economic backdrop and improving client demand so far in 2017 had boosted their confidence in February.

“While a number of firms cited heightened uncertainty about the path to Brexit, it seems clear that these concerns have receded in comparison to the projections reported last autumn,” said Tim Moore, senior economist at IHS Markit.

As firms become more optimistic and less fearful about the near-term impacts of political uncertainty, they’re expected to increase job hiring and capital expenditure (capex) plans for the year, the survey found.

The number of UK firms forecasting increasing their staff is at its highest since autumn 2015, at 27 per cent in February, up from 19 per cent in October.

The balance of firms expecting to increase capex in the year, at 13 per cent, was well above the average level seen in 2016 of seven per cent but down from the post-crisis peak in early 2014 of 24 per cent.

Prices are set to rise as cost projections surge

Some businesses said the slump in sterling’s value gave them a competitive boost, but others noted concerns about the impact of higher inflation on consumer spending.

“The fly in the ointment is sharply rising prices for imported materials, which contributed to an increase in overall cost projections to their strongest for six years,” Moore said.

“As a result, UK firms are expecting to increase their prices charged at the fastest pace since the survey began in late-2009.”