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Half of UK businesses plan to raise prices

UK business confidence robust but price hikes expected
Some 52% of firms expect stronger trading prospects in the next 12 months. Photo: Belinda Jiao/SOPA Images/Sipa USA

Business confidence wavered for a second month in November, as winter took hold and companies fretted about surging COVID cases. Despite the retreat, it was, however, above the long-term average.

The net balance for firms’ own trading prospects in the year ahead was down three points to 39%, according to the Lloyds Business Barometer (LLOY.L).

The barometer found that 52% of firms expect stronger trading prospects in the next 12 months, while 13% — up one from 12% — are anticipating weaker business activity.

Economic optimism also dropped marginally to 41% — down two from 43%.

Watch: What is inflation and why is it important?

Meanwhile, half of businesses expect to raise the price of their goods — up one from 49% and a record high.

Read more: Cyber Monday and Black Friday sales drive shoppers to malls as UK high street suffers

Nine of the 12 UK regions and nations registered a decrease in business confidence in November. However, Wales saw a 14 point increase to 37% and the South East was up 13 points to 34%, experiencing significant increases in confidence. The East of England also registered an improvement of five points to 38%.

The solid performance of financial & business services, the broader economic reopening and gradual return to offices meant that London, which was down two points to 63%, remained the strongest region.

Northern Ireland (down 26 points to -5%), the North East (down 16 points to 45%), the South West (down 14 points 34%) and the East Midlands (down 13 points to 42%) all saw double digit declines in confidence.

Yorkshire and the Humber (down nine points to 31%), the West Midlands (down eight points to 42%), the North West (down eight points 34%) and Scotland (down four points to 27%) were the other regions that also saw dips.

Hiring intentions tempered in November, falling seven points to 30%, the lowest since the end of the furlough scheme.

However, overall recruitment activity remained positive with nearly half of firms (down three to 48%) planning to increase staffing levels over the next 12 months, Lloyds said.

Pay growth expectations showed continued strength in November as businesses looked at ways of retaining or attracting staff. A quarter of firms expected a 3% or more average wage growth and 9% of businesses anticipated a pay freeze — both unchanged from October.

Read more: UK consumer credit surges to £700m in October

At a sector level, confidence slipped in manufacturing (42%), to its lowest since August, linked to the persistence of supply-chain disruptions, while it fell to a seven-month low of 28% in construction.

In contrast, the retail sector (45%) bucked the trend with a pickup in confidence, reflecting hopes for higher spending ahead as the festive period approaches. Services confidence (41%) fell slightly, with strong growth for financial & business services and communications offset by more downbeat responses from education, health and public administration.

Watch: Easy budgeting tips for when you leave home