How are national UK lockdown variations affecting business confidence?
The gloom of the past winter seems to be lifting as businesses open up and the vaccine rollout continues successfully, and the easing of lockdown restrictions across the UK is boosting business confidence. After a tough year for everyone, businesses are confident of a strong recovery and business confidence is above the long-term average for the first time since 2018, according to Lloyds. Though strangely prices are expected to stay flat.
Lloyds’ Business Barometer showed business confidence was highest across England, with the other nations feeling significantly less buoyant, though still positive. England’s road map has given specific dates for opening and lifting all restrictions, even if they are preliminary. While the other nations have taken different approaches, increasing uncertainty for businesses.
This increase was broadly consistent across sectors, though manufacturing was more up-beat than other parts of the economy. This is likely down to strong global demand, despite ongoing supply chain issues. While retail confidence is driven by the hope pent-up demand will drive spending.
All other trends measured in the Business Barometer were moving in positive directions, as business look to take on more staff and increase pay. The only striking trend was that businesses expected prices to stay flat. Analysts had been predicting short-term price increases, as demand increases due to relaxed restrictions and high personal saving rates, but also because temporary supply side shocks and constraints are affecting businesses and supply chains. Shipping, particularly containers from China, have risen in price, and importing into the UK is now more time consuming and costly for businesses that rely on European supply chains. We were surprised to see that businesses largely expected prices to stay flat as, in our experience, businesses were looking to pass some of these supply chain cost increases onto their customers.
The chart below shows the significant price increase in global container freight:
Chart: Global Container Freight Price Index
Overall, there is a much positive outlook than at any point in the last year. Businesses feel able to make plans for recovery and growth and people are able to travel and meet family and friends they haven’t seen for months. There is still some uncertainty on the horizon, but the forecast is looking increasingly positive.