According to Lloyds Bank’s monthly business confidence index which has risen to 44 per cent in Jan, up nine points from 35 per cent in December and the strongest start to a new year since 2016. It is also the best reading since February 2022, the month in which Russia launched its invasion of Ukraine and sent inflation in Europe to multi-decade highs.
Widespread anticipation of several interest rate cuts by the Bank of England this year has bolstered business confidence. The central bank is expected to cut its base rate from its present 5.25 per cent, a 15-year high, four or five times in 2024. Inflation is expected to continue its descent in the first half of this year, with several economic consultancies projecting that the rate will be back to the Bank of England’s 2 per cent target by April from its present level of 4 per cent.
Looser financial conditions alongside receding price pressures should strengthen personal finances, delivering a boost to consumer spending, which, in real terms, has been constrained for a year. Wages are also forecast to continue to rise faster than prices for most of 2024, helping to offset the hit to household living standards from the cost-of-living crisis. Lloyds’s research has found that a net balance of 33 per cent of companies plan to expand their workforces over the coming 12 months, up from 29 per cent in December, in anticipation of stronger economic growth.
