Firms confident in face of inflation 

Firms have expressed confidence that they can utilise high inflation to rebuild their margins, according to Lloyds Bank’s monthly barometer. It rose from 33% to 38%, an uplift of five points. The long-term average is 28%.
 
Of the 1,200 companies polled in May 2022, six in 10 said they planned to hike prices to protect profit margins, as the cost of supplies continues to rise. 

In spite of this, only 16% planned to bolster employees’ pay by four percent or more. Inflation is expected to surpass 10 percent by autumn 2022. 

Those with plans to recruit rose, with 53% intending to employ staff, a rise of nine percent from April 2022. 

Of the 12 UK regions surveyed, eight expressed optimism about upcoming prospects – up from seven in April 2022. Businesses in London, the West Midlands and the northwest showed the highest level of confidence.

However, consumer-facing sectors displayed lower levels of confidence. Retail organisations reported a lower-than-average level of 27% on the index. 

Similarly, the cost-of-living crisis’ impact upon disposable incomes saw retailers’ confidence slump to the poorest level since March 2021 – when Covid-19 restrictions remained in place. 

Martin Beck, chief economic adviser to the EY Item Club forecasting group, said: “Unemployment is close to a record low, households have accumulated £180bn of unplanned savings during the pandemic and the chancellor’s package of support to households goes a long way to alleviating the concerns around higher energy prices for the most vulnerable. 

“So while businesses aren’t lacking in things to worry about, there are factors at play which they can take heart from.”

Hann-Ju Ho, a senior economist at Lloyds Bank said: “Firms in general seem able to rebuild some of their margins through price increases. Consumer-facing industries, such as retail, are not feeling the same confidence.”