Recovery hopes are boosted by upbeat surveys

The latest Business Trends report by business advisors BDO LLP indicated the largest increase in business optimism for more than two years.

BDO’s Optimism Index, which points to business performance two quarters ahead, surpassed the crucial 95.0 mark that indicates growth, with a reading of 98.0 for February – the highest in nine months.

BDO said this represents a huge jump of 3.9 points, the single biggest monthly increase since December 2009.

It is also the first time the index has topped 95.0 since last August and BDO said this demonstrates a considerable improvement from the gloomy 91.5 reading just two months ago.

The report coincides with the latest data from Lloyds TSB which said that private companies in Yorkshire and Humber reported an increase in business activity in February, outperforming the UK average.

A third survey from the Federation of Small Businesses said confidence among small businesses has improved this year despite rising overheads and problems accessing finance.

BDO said it was very encouraging for the UK’s overall economic recovery that the upturn in business confidence is broad-based.

In the services sector, which accounts for roughly 75 per cent of the UK’s output, optimism is especially marked, increasing to 98.3 in February from 94.7 in January and comfortably exceeding the 95.0 growth threshold.

Similarly important for the UK, BDO’s Manufacturing Optimism Index jumped to 96.9 in February from 91.3 the previous month.

Peter Hemington, partner at BDO LLP, said: “It is encouraging to see business confidence improving significantly for the second consecutive month. Increasing optimism across sectors like manufacturing and the all important services sector is particularly welcome.

“To ensure we continue to see progress and positive third quarter growth as our figures indicate, the Chancellor should use the upcoming Budget to ensure that the UK remains competitive for businesses.

“Measures that encourage growth, such as further accelerating the reduction in the main rate of corporation tax, will help to achieve this.”

The Lloyds TSB Yorkshire & Humber Business Activity Index, which measures the combined output of the region’s manufacturing and service sectors, posted a reading of 54.3, well above the 50.0 no-change mark that separates growth from contraction.

Lloyds TSB said the latest reading signalled a solid increase in output, which was stronger than the UK average, but the data suggested that new orders increased in the service sector, but fell in manufacturing.

Employment in Yorkshire and Humber rose for the fifth consecutive month in February and was the fastest among all 12 UK regions. Both manufacturers and service providers hired additional staff during the latest survey period.

Martyn Kendrick, area director for Lloyds TSB Commercial in Yorkshire, said: “Yorkshire and Humber’s private sector continued to grow in February, with the latest solid expansion proving stronger than the UK average. The rise in business activity also supported further job creation, with employment increasing at a faster pace than any other region.

“The region’s service sector remained the main engine of growth as manufacturers saw only a modest rise in production,” he added.

The Federation of Small Businesses’ ‘Voice of Small Business’ Index showed business confidence bounced back from the record lows reported at the end of 2011.

The index, which surveyed more than 3,000 members, showed confidence rising for the first time in a year, with more than half of those surveyed aiming to grow in the 12 months ahead.

Gordon Millward, regional chairman of the Federation of Small Businesses, said: “The Government must bolster this confidence by doing everything in its power to remove the barriers to growth which our members have highlighted. That means taking action against rising energy and regulatory costs.”