Business confidence in the North East rose 13 points during July to 40 per cent, the highest reading in the UK, according to the latest Business Barometer from Lloyds Bank.

Companies in the North East reported higher confidence in their own business prospects month-on-month, up 11 points at 34 per cent. When taken alongside their optimism in the economy, up 14 points to 46 per cent, this gives a headline confidence reading of 40 per cent.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

A net balance of 21 per cent of businesses in the region expect to increase staff levels over the next year, down one point on last month.

Overall UK business confidence dipped three points to 30% in July but remains well above the year-to-date average of 19 per cent. Businesses in the North East, East Midlands and North West were the most optimistic overall.

In July, four regions reported an increase in confidence: the North East (up 13 points to 40 per cent), North West (up nine points to 38 per cent), East Midlands (up seven points to 38 per cent) and West Midlands (up one point to 30 per cent), while the remainder reported a drop.

Scotland (down 14 points to 28 per cent), East of England (down 11 points) and Wales (down nine points) reported the biggest falls in confidence but all retained an overall positive reading.

The overall number of UK firms expecting planning to create new jobs in the next 12 months rose one point to 18 per cent in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen.

Steve Harris, regional director for the North East at Lloyds Bank Commercial Banking, said: “With the full easing of lockdown restrictions and many firms returning to normal trading, business confidence across the region has soared.

“While it’s tremendously encouraging to see the North East take the top spot in terms of business confidence, the pandemic is still generating some uncertainty. For example, staff shortages caused by the rise in contact tracing is proving to be a real challenge, especially for the retail and hospitality sectors.

“As we embrace the return to normality, we’ll continue to support firms across the region and help them overcome any new challenges that may emerge.”

Confidence fell slightly in the broad economic sectors in line with the overall economic picture. Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33 per cent (down from 35 per cent) for manufacturing and 32 per cent for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33 per cent and 28 per cent, respectively.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “A sixth consecutive monthly increase in employment expectations continues to highlight the resilience of UK businesses. With Covid-19 restrictions having now been significantly eased in parts of the UK we can have further confidence in firms’ outlook for the UK economy.”