Business shows its bounceback-ability as confidence jumps after Brexit fall
Confidence among UK firms has bounced back in July after plummeting in the immediate aftermath of the EU referendum, a leading indicator has found.
The Lloyds business barometer jumped 23 points over the past four weeks to stand at 29 on an index where positive scores indicate overall optimism. In the days after the vote it crashed to a four-year low of just six.
The lender said firms reported stronger hiring intentions, much-improved optimism and confidence over future economic prospects.
The proportion of businesses that said they are planning to increase their workforce – usually a decent indicator of underlying sentiment – rose to a ten-month high of 43 per cent in July. The number of firms who were down on the prospects for the wider UK economy halved from 41 per cent to 20 per cent.
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Economic data since the UK voted to leave the EU has been relatively mixed and hard to interpret. While some surveys conducted immediately after the vote, including a flash purchasing managers' index (PMI) and the CBI's industrial trends index, have shown drastic levels of uncertainty, others have been more muted.
The Bank of England, for instance, found "no clear evidence" the vote for Brexit was weighing on the economy just yet, and the financial markets appear to have settled. The FTSE 250 briefly passed its pre-referendum level yesterday and the FTSE 100 is at a 12-month high.
A separate measure of confidence in the wider economy bounced back into positive territory on the Lloyds survey, rising from minus 11 to 17.
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Hann-Ju Ho, senior economist for Lloyds Bank, said the survey showed "a rebound in both business prospects and economic optimism".
He added: "Although some concerns remain about wider economic prospects, business activity expectations have surpassed the level in May before the referendum. Furthermore, hiring plans continue to remain stable which is a strong indication of longer term resilience."
The Bank of England will deliver its verdict on the state of the post-Brexit economy next week when it publishes the August Inflation Report, containing Threadneedle Street's latest forecasts for GDP, wages, inflation and a number of other indicators. Financial markets predict the Bank is all but certain to cut interest rates to at least 0.25 per cent and could unlock another bout of quantitative easing.