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Christmas sales lift UK business confidence amid fear of recession

Shoppers walk past sale signs at a department store on Oxford Street in London, Britain, December 28, 2021. REUTERS/Toby Melville
Shoppers walk past sale signs at a department store on Oxford Street in London. Photo: Toby Melville/Reuters (Toby Melville / reuters)

Christmas sales in the UK have given struggling businesses a much needed lift as fears of a coming recession grow.

Businesses in the UK reported being more positive about the prospects of better trading over the Christmas period.

According to the Lloyds Bank Business Barometer (LLOY.L), business confidence increased in December by seven points to 17%, the first rise since May this year.

The report stated that confidence in manufacturing increased, ending a six-month decline, and construction rose to a six-month high.

The rebound in business confidence was driven by the largest monthly rise in economic optimism since April 2021.

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In December 43% (up from 37%) of businesses were more optimistic towards the economy, and increase from 37% the month before.

In December the report found that 35% of businesses were less optimistic.

The pessimistic responses were less than in November, which saw 40% of businesses state they were less optimistic.

This resulted in a net balance of 8%, a rise of 11 points from November.

Eight of the 12 UK regions and nations saw a rise in business confidence, with the most confidence seen in the North West and North East.

Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Business and Commercial Banking, said: “It’s encouraging to see the confidence of most regions and nations rallying as we end the year. This has been a tough time for businesses with rising costs and much uncertainty, but some firms are becoming more confident as we head into 2023.

“While wage expectations start to temper, prices continue to rise and keeping a close watch on cash flow remains a priority for businesses, no matter what industry you operate in.

"For those who are in need of support or are looking for advice, especially into the festive season and new year, at Lloyds Bank we are by your side in times of uncertainty.”

UK businesses also stated they were more confident about trading prospects in 2023.

Of those businesses polled, 45%, up from 43% last month, forecasted a stronger trading environment in the new year, and 18%, down from 19% in November, said they expected weaker activity.

Referring to the increased trade over the Christmas period, Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “Business confidence has received a boost in the run up to Christmas as firms anticipate a better festive trading period than last year.

"While firms report being hopeful for a more successful 2023, inflation and the risk of an economic downturn remain the biggest concerns for businesses, with rising costs evidenced by the number of firms expecting to raise prices.

“Wage growth is expected to remain high for now as retaining existing staff and attracting new talent will continue to be priorities for many businesses going into next year.”

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