Business confidence level improves

Business confidence rose for the third month in a row in March, according to a survey by a division of Lloyds Banking Group, as the threat posed by the eurozone debt crisis appears to recede.

The Lloyds Bank Wholesale Banking & Markets Business Barometer rose 30 points to a nine-month high last month as 51% of companies said they were now more optimistic regarding economic prospects - the first time since June last year that more than half were positive about the UK outlook.

Businesses' improved sentiment on the UK's economic outlook was "no doubt" influenced by the less immediate threat of a Greek default causing wide disruption across Eurozone economies, Lloyds said.

Trevor Williams, chief economist at Lloyds Bank Wholesale Banking & Markets, said: "This month's acceleration in confidence about UK economic prospects supports our view that concern about the Eurozone debt crisis was a major contributor to the sharp decline in sentiment during the latter months of 2011.

"Indeed, the rebound in confidence mirrors the fallback in market concerns over the potential fallout from a Greek default since December last year. This month's results also provide strong support to our contention that GDP will expand in the first half of 2012."

However, there was a marginal fall in businesses' confidence in their own prospects, with the net balance dropping one point to 40%.

The findings suggest that it is possible that overall economic output might have expanded in the first quarter of the year, avoiding recession.

The survey's supplementary questions on employment prospects and profit margins provide findings that are largely in line with the general positive sentiment felt by businesses.

The net balance for employment prospects has risen to 28% from 18% a month ago, the third consecutive monthly increase, Lloyds said, while profit margins also improved.

Average domestic prices fell for the second month in a row to 12% from 15%, which suggests that the improvement in profitability reflected lower costs rather than higher prices which may help to contain inflation.