Lloyds poll finds UK business mood at five-month peak

A broader run of recent data has pointed to a firming UK growth backdrop, and the latest improvement fits within it, with stronger customer demand and greater certainty about their own trading prospects named by businesses as key drivers. Pricing intentions now stand at their lowest since 2022, and the fall is likely the element rate setters notice most, because it points to some easing in the inflation pressure companies expect to pass on in the coming year. Overall, the survey suggests a more constructive climate for investment and growth, with no corresponding rise in price-setting behaviour, and if maintained that mix could provide a more comfortable policy environment.

British companies are more confident and less keen to push prices up, a combination that is encouraging for both growth and inflation.

Summary:

• Lloyds' monthly business confidence index moved up 4 points in August to +53%, ahead of its +47% 12-month average and the strongest reading since March.
• Confidence in the wider economy increased 7 points to +49%, well above the +37% average of the past year.
• Firms' own trading outlook rose 2 points to +58%, slightly above the +56% 12-month average.
• The share of companies intending to raise prices in the next 12 months dropped 3 percentage points to 51%, the lowest reading since 2022.
• Lloyds put the improvement down to stronger customer demand, more optimism on the wider economy and greater confidence in firms' own trading prospects.

Lloyds bank's survey shows British businesses more optimistic than at any time since March, with the monthly confidence index advancing 4 points in August to +53%. That put the gauge comfortably above its +47% average for the past 12 months and added to a growing pile of evidence that the economic outlook is improving.

The gain was spread across the survey's components. Optimism about the wider UK economy was up 7 points to +49%, far ahead of the +37% average over 12 months and among the sharpest monthly advances in the report. Confidence in firms' own trading prospects also strengthened, gaining 2 points to +58%, marginally above the +56% average for the past 12 months, a sign that companies feel surer of both the broader economy and their own place within it.

Lloyds said the improvement reflected reports of stronger customer demand, greater optimism about the wider economy and rising confidence in firms' own trading outlook, elements the bank said should support investment and growth plans going forward. Improving sentiment on the macro picture and on companies' own conditions at the same time points to a more self-reinforcing confidence gain than one propelled by a single narrow factor.

The most striking detail in the survey may be on pricing. The proportion of businesses planning to raise prices over the next 12 months fell by 3 percentage points to 51%, its lowest since 2022. That suggests firms see less need to pass cost pressures on to customers even as their confidence in demand and trading conditions strengthens, a mix typically viewed favourably for inflation.

Taken as a whole, the August figure extends a spell of improving sentiment among UK businesses and is consistent with other recent signals that the broader economy is on steadier ground. The pairing of rising confidence with weaker price-rise intentions offers a reasonably encouraging picture for policymakers balancing growth support against inflation management, with companies more assured about demand without leaning as heavily on price increases to protect margins.