Economy to pick up as spending and business confidence rise

Optimism among small businesses has reached its highest level for three years with confidence increasing throughout all parts of the UK and most sectors despite continuing borrowing problems.

The Small Business Federation says financial services companies are the most confident, reflecting the recent strength of the stock market. But, with four in 10 small businesses finding their applications for finance rejected, the federation wants the Chancellor to use the Spending Review later this month to set a clear plan for the Business Bank to provide advice on alternative means of finance.

The survey also shows more businesses expect to grow their operations over the next year and increase staff numbers and exports. Retail businesses remain the least confident while higher energy prices are the main driver behind the increase in business costs.

The Chartered Institute of Marketing says confidence is growing among its members after a hesitant start to the year but survey replies from 1,750 marketing professionals suggests the “rhetoric of austerity” is proving a brake on investment in new jobs and growth.

Consumer spending last month rose more than 4pc for the second time in the past four months as the sunny spell tempted shoppers into garden centres and DIY stores, while online spending grew by 12pc, according to Barclaycard.

Valerie Keating, Barclaycard chief executive, said: “Sentiment is clearly still fragile but the better performance we’re seeing across a wide range of sectors suggests that the green shoots of a sustainable recovery may finally be taking hold.”

Pressures on household finances are easing despite the squeeze on pay, say economists at Markit, the financial information services business. Expectations that inflation will continue to moderate and increasing confidence about job prospects are helping to offset the continuing attempts to restrict pay rises.

Data collected by Ipsos Mori from 1,500 homes for the Markit survey shows householders are the least downbeat about their finances since February 2010. The Markit Household Finance Index, the main barometer, has risen another 0.4 points to 40.8 and, although still below the 50 benchmark, has risen in three of the past four months.

Around 26pc of households said their finances had worsened this month while almost 8pc reported an improvement but Markit said the data pointed to a pick-up in the overall household financial outlook over the next 12 months.

Prospects for job security were rated higher and for only the second time in the past three and a half years public sector employees were more optimistic than their private sector counterparts.

Tim Brown, Markit senior economist, said: “Improving household finance trends are an early indication that the UK economy has continued to strengthen in June. Households perceptions of financial instability are now at a level unsurpassed over the past four and a half years.”