BUSINESS confidence in the eastern region is continuing to rise, driven by strong expectations for profits, according to a new survey.

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Firms in the region also have improved expectations for sales and orders, despite slow overall growth in the UK, with exports to Europe expected to bounce back in the next six months in the light of policy measures taken to support the eurozone economy.

However, the latest Business in Britain survey from Lloyds TSB Commercial indicates that the first half of 2013 is likely to see only moderate increases in employment and investment levels in the region.

The new edition of the twice-yearly report, now in its 21st year, canvassed the views of 1,800 UK businesses, including 345 in the East Midlands and East of England.

It shows that optimism is at its strongest level since the economy came out of the initial recession in 2009, driven in particular by stronger profit expectations but also by a better outlook for sales and orders.

The survey’s key Business Confidence Index tracks businesses’ expectations for sales, orders and profits for the coming six months and presents the overall “balance” of opinion, weighing up the percentage of firms that are positive in outlook against those that are negative.

In the East Midlands and East of England, the overall index has increased to a positive balance of 20%, up from 12% in last survey six months ago, due largely to a rise in expected sales and orders over the next six months.

However, while confidence continues to rise, employment and investment intentions for the next six months have only moderately increased, suggesting that companies remain cautious about future hiring prospects and capital projects.

Gareth Oakley, regional director for Lloyds TSB Commercial in London and East, said: “It is good to see that businesses in the East of England have managed to work through the tough economic headwinds of the last couple of years and have a rather more positive outlook for 2013.

“Businesses are clearly feeling more optimistic about Europe and, after a poor 2012, we should see more demand and orders coming through from the continent over the coming months.

“However, many firms are still cautious and are not investing in increasing their headcount or on key capital projects.

“Although this is understandable given uncertainty, many more could consider investing now. It will be improvements in competitiveness and market development that will ensure that the UK economic recovery is sustainable and long lasting. Investing now could pay dividends for companies’ profit margins in the future.”

Trevor Williams, chief economist, Lloyds Bank Commercial Banking, added: “Policy measures undertaken by the European Central Bank and EU officials are beginning to filter through and businesses show greater optimism about their trading activity over the next six months, especially of exports to the euro area.

“These glimmers of hope should lead to a gradual increase in the underlying pace of economic expansion over the forthcoming year.”

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