By Daniel Hunter

Business confidence is at a five year high, having reached its strongest level since January 2008 fuelling hopes of a continued uplift in activity during the second half of 2013, according to the latest Business in Britain report from Lloyds TSB Commercial Banking.

The twice yearly report, now in its 21st year, canvasses the views of nearly 1,800 UK businesses and shows that firms continue 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 likely 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.

In this latest report, the confidence index has increased by 11 points to 30 per cent, from 19 per cent in the previous survey at the start of 2013. The index has risen above the long-term average of 21 per cent for the first time since the beginning of the global financial crisis in 2008.

“Businesses are clearly beginning to regain confidence about future trading prospects, after years of hesitation and concern, and we hope this renewed optimism will lead to growth for the UK economy," David Oldfield, Managing Director, SME and Mid Markets Banking, Lloyds Banking Group said.

Companies are also more positive about broader economic prospects than they have been since the end of 2009. Two fifths of businesses (41 per cent) stated that they were currently more optimistic than they were six months ago, while less than a fifth (17 per cent) stated that they were less confident about the economy.

Prospects for the second half of 2013 continue to look positive with expectations for total sales, orders and profits in the next six months — the three key barometers of business confidence — all increasing. The three indices have all risen above their respective long-term averages and point to stronger economic growth in the second half of the year.

Nearly half of businesses (45 percent) said that they expect their orders to increase during the second half of the year, compared to just under one in ten (eight percent) that think orders will fall. The resulting 37 per cent overall net balance expecting orders to increase in the next six months represents a 13 point increase from January 2013.

Half of businesses (50 percent) stated that they think their sales will increase in the next six months, while one in seven (14 per cent) expect a drop, leading to a 36 per cent overall balance expecting sales to increase. This is a 12 point increase from the first half of the year.

There are still concerns about the risk of weak domestic demand on the part of nearly half of all businesses (45 per cent) surveyed and businesses are also uncertain about the chances of increasing prices. The net balance for businesses expecting to be able to increase prices in the next six months fell four points to 13 per cent, in line with the long term average of 13 per cent.

However, businesses are still expecting rising sales and this in turn is boosting hopes of growing profits. Almost two fifths (38 per cent) of businesses anticipate an increase in their profits over the coming six months, while a fifth (20 per cent) expect to see a drop. This results in a net balance of 18 per cent, expecting rising profits, which is a lift of nine points since January and the highest level for the profitability index since the economy emerged from the recession in late 2009.

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