According to a recent survey, business optimism reached its highest level for 22 years in January, indicating that business owners believe the economy to be firmly back on track.
On a regular business optimism index, the rate rose to 103.8 in January, up from 103.4 in December, hitting its highest level since the index began in 1992. The rating is also well above the 100 mark, which indicates that the UK is expected to outperform long-term growth trends.
Meanwhile, the index that measures hiring intentions over the next six months reached 101.3 in January, its highest level since August 2008, indicating that additional job creation is under way. In addition, optimism in the manufacturing industry was at an all-time high, while the outlook for the dominant services sector also looked better.
Firms are raising headcounts in response to rising client demand and the data suggests that the unemployment rate is likely to fall below the Bank of England’s 7.0 per cent threshold for considering raising interest rates in the very near future.
The Bank’s Governor, Mark Carney, had originally said that the Monetary Policy Committee would think about raising interest rates when unemployment fell to 7 per cent.
However, the unemployment rate dropped to 7.1 per cent in the three months to November, suggesting that a rate rise could be imminent, but Bank policymakers have said that they would not be hurried into raising rates.