Retailers are more optimistic about their profits and growth prospects than at any point in nearly a decade, according to new data from Lloyds Bank — signalling growing confidence in the UK economy despite continued fiscal pressures and global uncertainty.
The bank’s latest Business Barometer, released on Monday, found that optimism among retailers surged in March to its highest level since August 2015. Sentiment in the sector jumped by seven points to 58 per cent — well above the overall UK business confidence reading of 49 per cent, which held steady at a seven-month high.
The upbeat data follows stronger-than-expected retail sales figures from the Office for National Statistics (ONS), which reported sales rising by 1.4 per cent in January and 1 per cent in February. Real incomes also posted their fastest rise in nearly ten years at the end of 2023, supporting a pick-up in consumer spending.
The ONS said the savings ratio — the share of disposable income being saved — remained well above the long-run average at 12 per cent in the final quarter of 2023, suggesting there is still room for households to release further spending power.
Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said: “Business confidence remained steady this month, suggesting that UK companies may have been waiting to see the impact of government decisions at home and globally. Despite this, the data continues to reflect a positive growth trend in the UK economy.”
According to the survey of 1,200 firms conducted before Rachel Reeves’s spring statement, nearly two-thirds of businesses said they expected to grow in the year ahead. However, there was a slight dip in hiring expectations, reflecting continued concerns over labour costs and tax pressures.
In particular, tax rises announced in the October budget continue to loom over business planning. From 6 April, the main rate of employers’ national insurance will rise from 13.8 per cent to 15 per cent, and the earnings threshold triggering contributions will fall from £9,100 to £5,000 — a move that could hit labour-intensive employers hard, especially in retail and hospitality.
Despite these concerns, many economists believe that private sector surveys may have overstated the likely impact on hiring, noting that the tax hike amounts to less than 1 per cent of GDP.
Looking ahead, 63 per cent of businesses surveyed said they planned to increase prices over the coming year — reflecting both inflationary expectations and a stronger demand outlook — while only 2 per cent said they would cut them.
The Bank of England last week left interest rates unchanged at 4.5 per cent but warned that inflation could rise again later this year. Still, with retail sentiment buoyant and consumer spending showing resilience, confidence across the sector appears to be mounting — positioning UK retailers for a potentially strong 2024.
