Companies are stepping up hiring plans and raising wages as the recovery picks up steam, but optimism in the private sector has peaked.
These are the findings according to a corporate survey conducted by Lloyds Banking Group.
Its monthly business barometer found that hiring intentions rose for the sixth consecutive month to the highest level since November 2018. More than a quarter of those surveyed, 27%, expect salary growth of 2%, compared to 24% of the last month and vice versa. according to pre-pandemic readings.
Hann-Ju Ho, Senior Economist at Lloyds Bank Commercial Banking, said: “A sixth consecutive monthly rise in job expectations coupled with an increase in wage growth predictions continues to highlight the resilience of UK companies.
“With Covid-19 restrictions now being significantly eased in parts of the UK, we can be more confident in the business outlook for the UK economy.”
However, this masked a slight drop in optimism. Of the 1,200 companies contacted between July 1 and July 15, the proportion that felt confident was 30 percent higher than those that were pessimistic. That was below 33 percent, but still above the long-term average of 28 percent.
Optimism in the economic outlook dropped from 36% to 32% and confidence in the business outlook dropped from 30% to 28%. However, confidence in the hospitality sector, reading 63 percent, and transportation, at 53 percent, was particularly strong, reflecting a more open economy.
A separate report from BDO, the accounting firm, revealed that confidence is hurt by staffing shortages and inflation concerns. Its survey of 500 midsize companies, conducted every two months, showed that 74 percent want to invest now and 58 percent expect a return to pre-Covid sales in the next 12 months.
However, 99 percent of the companies surveyed expressed concern about rising inflation, and 19 percent reported that it could delay growth plans; 24 percent say they can raise prices to offset higher costs, and 15 percent say they can cut staff as a result of price increases. Inflation is 2.5 percent, but some economists believe it could hit 4 percent by the end of this year.
Staff shortages are already forcing companies to raise wages or cut services. More than half, 58 per cent, of those surveyed have roles they cannot fill and 34 per cent cannot find people with the right skills, according to last month’s survey of companies with revenues between £ 10 million and £ 300 million.
Seventeen percent said they had to limit their services because they can’t find staff, and 31 percent have offered a raise or bonus to attract and retain talent. Kaley Crossthwaite, Partner at BDO, said: “Your firm belief that now is the right time to invest in your businesses should provide a positive boost to the economy. While the resilience of midsize companies means that their outlook is more optimistic, the pressures of staffing shortages, creeping inflation and long-term infection trends should provide a great deal of realism to any forecast. “
The survey also found evidence of the increasingly important role that private equity is playing in the growth of midsize companies, with 61 percent of respondents reporting that they have received new private equity investments since the start of the pandemic and an additional 34 percent. actively looking for an investor.