Sales figures point to further growth

The report, based on the responses of more than 1,800 UK firms, shows that during the first half of 2007, the number of companies reporting higher rather than lower sales reached the highest level since the survey began. A balance of 41% of companies reported higher sales growth during the six months from January, up from a balance of 37% at the start of the year. Despite the looming prospect of higher interest rates, business confidence remained buoyant, rising from a balance of 37% in January to 41% in the past six months. A total of 87% of businesses expect further rate increases over the next six months, however this did not dent their expectations for profits, which reached their highest level in a decade, mirroring other data published by the ONS. As well as this, hopes for sales and order book growth also continued to rise. The balance of companies expecting higher rather than lower profits over the next six months hit 30%, rising from 25% in January, while the balance of firms expecting order books to rise over the next six months increased to 42% from 39% in the previous survey. For sales, the balance rose from 47% to 51%. Despite this growing confidence, businesses are less certain they will be able to increase prices during the next six months. The balance of firms expecting to raise rather than lower prices by the end of the year has decreased from 26% to 23%. There are some signs, however, that even though intentions of price increases have lessened, inflationary pressures on suppliers for raw materials may force up prices further down the line. One area that is showing signs of weakening is the export market. The survey provides some evidence that the strength of the pound is starting to bite, with the balance of firms reporting higher exports to non-European countries falling to 12%, from 19% in the last survey. Diana Brightmore-Armour, CEO of corporate banking and co-head of corporate markets at Lloyds TSB said: “2007 is shaping up to be a great year for businesses. Sales hit such a high in the first half that the prospects for further growth by the end of the year are very strong - and the effect this has had on business confidence is clear for all to see. Firms may harbour fears about the future of interest rates and the chances of price increases may be reduced but even so, their outlook for continued growth in the second half of the year is positive. “Signs of a decline in exports are not to be dismissed, but nevertheless, the overall effect on order books is bound to be limited, propelled by strong UK demand and a stable European economy.”