What’s going on here?

British companies are riding high on optimism following Prime Minister Keir Starmer’s landslide election victory on July 4, with confidence reaching its highest point in seven years.

What does this mean?

UK firms experienced a remarkable boost in optimism in July, hitting peaks unseen since 2017. Thanks to Starmer’s win, the Lloyds Bank Business Barometer showed a jump in trading prospects for the next 12 months to 56%, up from 44% in June. The overall business confidence climbed to 50%, echoing May’s eight-year high. This wave of positivity spread across sectors, from retail and services to manufacturing and construction, highlighting a broad-based recovery. Interestingly, while more firms plan to raise prices – a trend likely to catch the Bank of England’s eye before its Thursday rate decision – these projected increases are still below May’s peak of 61%.

Why should I care?

For markets: Riding a wave of newfound confidence.

Stock market reactions are poised to be favorable given the surge in business optimism. A broad-based recovery can prompt investors to explore opportunities in retail, services, and manufacturing sectors, which are all showing strong confidence. Keep an eye on price projections too, as companies’ plans to elevate prices might influence inflation trends and inform the Bank of England’s interest rate policies.

The bigger picture: A new dawn for UK economy.

Prime Minister Starmer’s victory has infused new vigor into the UK economy, potentially setting the stage for a prolonged recovery. The boost in business confidence could translate into increased investments and hiring, driving economic growth. However, watch for the Bank of England’s response to these developments, particularly regarding inflation control and monetary policy adjustments.