Weaker pound helps rise UK businesses' hopes for year

The weak pound has improved businesses' trading forecasts and made them far more confident about the economy than at the end of last year, a poll claimed today.

Lloyds TSB found that 65% of firms were more optimistic about the economy in February than three months ago, while only 10% were less hopeful. The 55-percentage point balance was the strongest ever.

Its monthly Business Barometer indicated that companies' renewed confidence had also helped their own trading performance forecasts. Forty-six per cent expect business activity to pick up in the coming year, which is an improvement on January but below December's 48% figure.

Lloyds said the biggest improvement in confidence was in the industrial sector, where renewed hopes for exports are thought to have come about because of the weak pound and recovery in global trade volumes.

The balance of industrial firms expecting increased business activity rose 11 percentage points and those expecting economic improvement jumped 44 percentage points last month.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "Renewed hope for exports is just the tonic businesses needed.

"For many UK firms involved in exporting it has provided a welcome confidence boost - and that's why we've seen such a sharp rise in overall company views about the economic outlook.

"It is also important to look at the views businesses have of their own prospects - and its clear that, while confidence is on the rise, the mood is still very much one of cautious optimism."

The survey, which takes in more than 200 firms with turnover above £1 million, also highlighted shifts in views across the country.

Lloyds said the improving industrial sector had contributed to rising business sentiment in the North and the Midlands, while the South was more pessimistic.