Business confidence in Yorkshire is riding high according to the latest Business in Britain report from Lloyds Bank, fuelling hopes of continued economic growth in the second half of 2014.
The twice yearly report, now in its 22nd year, canvasses the views of 1,500 UK businesses and shows that Yorkshire’s firms are continuing to grow in confidence, driven by expectations of stronger profits, orders and sales over the next six months.
The survey’s key Business Confidence Index tracks businesses’ views of expected sales, orders and profits for the coming six months and presents the overall “balance” of opinion, weighing up the percentage of firms that are positive in outlook against those that are negative.
Since the last report in January 2014, the confidence index in Yorkshire has increased by 16 points to 57 per cent.
This was mainly driven by firms’ expectations of increasing profits – reflecting businesses’ renewed optimism for the UK economy.
Jon Pulford, area director for SME Banking in South Yorkshire, Lloyds Bank Commercial Banking, said:
“This represents a good upturn in confidence for Yorkshire.
“We hope that it will lead to a further improvement in economic activity for the second half of 2014 to allow British businesses to grow and prosper.”
Prospects for firms across the region in the second half of 2014 look set to continue the rebound in UK economic activity since early 2013.
Expectations for total sales, orders and profits in the next six months, the three key indicators of business confidence, have all climbed further.
Almost two-thirds of Yorkshire’s businesses (64 per cent) said that they expect their orders to increase during the second half of the year; compared to only three per cent that anticipate a decline.
The resulting 61 per cent overall net balance represents a ten point increase from January 2014.
Similarly, almost two-thirds of businesses (65 per cent) stated that they think their sales will increase in the next six months, while under a tenth (six per cent) expect a drop, leading to a 60 per cent overall balance.
This is an 11 point increase from the beginning of the year.
The balance of firms anticipating greater scope for increasing prices over the next six months has increased by seven points to 36 per cent.
Firms’ hopes of raising prices may help to underpin their expectations of stronger profits over the next six months.
The net balance of firms expecting rising profits increased nine points to 54 per cent.
Taken together, these forward-looking indicators suggest that the current momentum of economic growth is set to continue.
More than a quarter of businesses (26 per cent) said that they will increase staff numbers during the second half of the year and eight per cent said they planned reductions.
The overall net balance of 18 per cent expecting to boost staff numbers is a slight rise of two points from January this year.
The increase in the net balance points to further employment gains as the recovery matures.
At the same time, the balance of companies reporting challenges in the recruitment of skilled workers continues with a 13 point increase to 47 per cent.
This suggests a potential strain in the market for skilled labour which could put pressure on pay growth, although the national index is still well below its 1997-2007 readings which averaged 47 per cent.
Expected capital expenditure is also on an upswing with the net balance rising since January’s survey.
The report shows that almost a third of businesses (32 per cent) expect to increase their capital expenditure over the next six months while one in ten (ten per cent) are planning cutbacks.
This results in a net balance of 22 per cent planning to ramp up investment in the second half of the year, which is an increase of seven points from January this year .
Mr Pulford added:
“It’s encouraging to see that businesses in Yorkshire are looking to export more and that they feel more bullish about Europe as it emerges from recession.
“The survey implies that they are eager to invest more in infrastructure and staff, which we hope will result in them developing and growing on the international stage.”