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British business confidence at highest level since 2015 - Industry roundup: 3 June

British business confidence at highest level since 2015

Overall business confidence in the UK reached its highest level for over eight years, according to the latest Lloyds Bank Business Barometer. Confidence increased by 8 points – up to 50% – a level last exceeded in November 2015. Survey data suggests the monthly increase is attributed mainly to businesses’ improved assessment of their own trading prospects and the broader economy. 

Firms’ expectations about their own activity had begun to settle at an elevated but steady level since January 2024. This month, however, the Barometer’s findings showed that 62% of businesses expected stronger trading prospects (up from 57%), while 8% predicted weaker output (down from 10%). The resulting net balance increased by 9 points to a seven-year high of 54%.

Businesses also showed increased positivity regarding the wider economy. 62% of respondents said they were more optimistic than three months ago (up from 57%), while 16% were more pessimistic (down from 18%). The resulting net balance for economic optimism reached 46%, its highest point since September 2021. 

This survey was conducted from 1-16 May and coincided with the release of Q1 GDP data, which confirmed a rebound in growth and may have influenced findings. However, the result means current figures sit firmly above the survey’s long-term average of 28%.

Over half (54%) of all businesses surveyed said they expected their workforce to increase in the next twelve months, while 15% (down from 16%) expected a lower headcount.  The resulting net balance increased for the second month in a row, rising 6 points to 39%, and is the strongest expectation for staffing levels since March 2017. Wage expectations remained elevated relative to pre-Covid levels, with a higher proportion of businesses anticipating wage growth between 3-4% and 4-5%, although the proportion expecting above 5% growth remained steady.

For the second month in a row, more businesses said they expect to increase their prices in the coming months. 63% said they intend to raise their prices. In comparison, 2% (down from 3%) expect to lower their prices as businesses look to rebuild their profit margins against the backdrop of falling energy prices and inflation. The net balance increased 1 point to 61%, matching last November's result.

Similarly, there were particularly strong results reported in the construction and services sectors this month. Prospects in the construction sector jumped to 58% (up 20 points), the highest for 14 months, while in services, expected output increased to 57% (up 12 points). On the latter, it is the highest level since the survey was expanded in 2018. Expected business activity in the retail sector also improved to 49% (up 3 points). Although trading prospects in manufacturing eased slightly to 49% (down 3 points), the underlying trend over the last three months remains positive.

Confidence increased in 7 of the UK’s 12 regions in May. The most significant rises were in the South East, Scotland and the West Midlands, pushing them into the top three. The East of England was placed joint-fourth, despite a marginal fall, while a sizeable gain was also seen in London. Significant increases in the North West and Yorkshire & the Humber increased the confidence of businesses in these regions to close to the UK average. 


Investors like companies that are onshoring their operations

Investors feel more bullish about companies that have closer geographical control over their operations, according to Goldman Sachs' Equity Structuring group, which maintains a Global Onshoring custom basket of equities. 

The basket, which holds companies that have onshored their supply chains, has outperformed the MSCI World benchmark by roughly 6% year-to-date, as of 22 May. The US version of the “Onshore” basket has outperformed a corresponding US “Offshore” custom basket of equities by 9% during the same period.

In the US, several factors have converged to create a favourable backdrop for companies that benefit from the onshoring trend. These factors include US industrial policy, world events such as Covid-19, supply chain disruptions, shipping disruptions, and geopolitical events, and lower relative energy costs. Furthermore, these tailwinds aren't likely to stop soon. Among US companies, onshoring or “reshoring” investment has been concentrated in the semiconductor and technology sectors.

Although these big supply chain moves could come at a price, raising the cost of goods sold and lowering margins, “that is not being reflected in the stock prices or earnings revisions,” equity strategists Louis Miller and Faris Mourad write in their team's report. So far, they add, “companies exposed to the onshoring of US supply chains have structurally outperformed companies whose supply chains are predominantly in China.”

Earnings revisions are favouring companies with onshoring plans and their beneficiaries significantly more than those relying on offshore footprints. “The valuation on the other hand seems to be unchanged,” our strategists write, “providing an opportunity for investors as we expect this earnings trend to continue.”


HSBC introduces payment pre-validation for businesses

HSBC has introduced a payment pre-validation API to help business customers make payments with greater security, ease, and confidence. The API offers enhanced capabilities to verify payee details prior to initiating payments, making them faster and more reliable.

Through the bank’s API, business customers can gain real-time access to account validation and, where available, name matching functionalities. This should help reduce the number of payment failures caused by inaccurate, incomplete, or missing beneficiary account and name details.

The payment pre-validation API also helps lower the risk of fraud by enabling customers to verify payee details, reducing the likelihood of misdirected payments and payments being sent to fraudulent accounts, and offering an enhanced customer experience.

Designed to streamline the payee account validation process for businesses such as e-commerce merchants and insurance companies, the API offers seamless validation of beneficiary account numbers during user registration processes, ensuring greater accuracy and efficiency. Corporates can benefit from streamlined vendor management workflows by validating the beneficiary accounts for new vendors.

The API leverages Swift's global pre-validation service for payee accounts and benefits from existing regulatory schemes such as the UK's Confirmation of Payee (COP) and similar initiatives in Hong Kong. This integration enhances coverage and reliability for customers sending payments to beneficiaries in these jurisdictions, providing added confidence in the accuracy of account details.

In addition, Swift’s analytics-based solution offers insights into historical transaction data for accounts that do not currently offer the pre-validation service. This feature lets business customers verify the validity of beneficiary account numbers.


Türk Eximbank scores €1bn facility to help exporters with CBAM challenges

To support the investments of Turkish exporters in the green transformation, Turk Eximbank has signed a loan agreement as part of the “Türkiye Green Export Project” for €1bn. The deal is under counter-guarantee of Turkey’s Ministry of Treasury and Finance and the first-loss guarantee of €600m million from the International Bank for Reconstruction and Development (IBRD), a member of the World Bank Group, to ensure sustainable development in line with Turkey’s climate change mitigation efforts and carbon score target. 

The 10-year facility, in which Deutsche Bank, Standard Chartered Bank, BNP Paribas, and ING Bank participated, is significant as Türk Eximbank's largest borrowing transaction to date and the first IBRD guarantee aimed at supporting exporters' green transition.

The facility (under the Türkiye Green Export Project), is a collaboration among IBRD, lenders, and Türk Eximbank to assist Turkish exporters to overcome the challenges that may arise as a result of the European Union’s Carbon Border Adjustment Mechanism (CBAM). The first phase of CBAM will be implemented in high carbon-intensive production sectors as of 2026, other carbon-intensive sectors in the forthcoming period, and carbon taxes in other export markets. 

In line with the objectives of avoiding potential adverse effects on exporters operating in affected sectors and supporting green-product-producing exporters in expanding their exports, the project will finance exporters’ renewable energy production investments, energy efficiency investments, and the working capital needs of exporters who will make such investments. In addition to the aforementioned primary objective of green transformation, the facility also has social objectives.


Derivative Path and FNBO add FX payments solution for correspondent bank clients

Building on an existing relationship, Derivative Path and FNBO (First National Bank of Omaha) have introduced an advanced FX Payments solution tailored for correspondent bank clients. 

The solution is designed to streamline international payment processes. By combining FNBO’s banking services with Derivative Path’s cloud-based platform, it will offer features such as automated access to liquidity, real-time currency conversions, nostro account management, and competitive FX quotes for correspondent bank clients.

The FX Payments product offers quick implementation, branding and white-labelling capabilities, and an intuitive interface, which should ensure a seamless and efficient experience for banks and their customers. 

“Extending our collaboration to include FX Payments for mutual depository clients further solidifies our shared vision for offering state-of-the-art financial solutions,” said Zack Nagelberg, Chief Growth Officer at Derivative Path. 


Payments Innovation Alliance releases corporate security incident response procedure guide 

Nacha’s Payments Innovation Alliance has published the Security Incident Response Procedure Guide for Companies. This free tool provides procedures and actions to take when a company reasonably suspects a security incident or breach involving personal or other proprietary data has occurred.

The Guide is a tool for evaluating suspected incidents or breaches. It is designed to aid personnel in determining whether to trigger notifications to customers, individuals, regulators, credit card brands, the media, and/or consumer reporting agencies. It is particularly useful for companies assessing risk on a case-by-case basis, as it allows for careful consideration of the specific circumstances surrounding the risks and data involved in an incident. Companies may have additional contractual obligations if the incident or breach involves its customer data.

“Time is of the essence when responding to a suspected incident or breach,” said Matt Luzadder, Managing Partner, Chicago Office, Kelley Drye & Warren LLP, and co-leader of the Alliance’s Cybersecurity & Payments AI Project Team. “The types of data lost or stolen, the extent of the data loss and the governing federal and state laws are key considerations for a company’s response.”


Fintech expands AP automation technology for invoice processing

Financial-Information-Technologies, which goes by the name Fintech, an accounts payable (AP) automation technology provider for the hospitality and retail industries, has announced the expanded capabilities of its PaymentSource product. It will now include automated invoice processing for all business-to-business (B2B) transactions. 

Fintech has nearly 35 years of experience in the alcohol industry, automating invoice payment submission and collection for deliveries. Today, the firm processes over 52 million invoices annually, totalling US$53bn in annual purchases for its network of over 1 million B2B relationships.

Managing over 1,200 data integrations today, Fintech works one-on-one with supply chain partners to establish these connections using EDI, CSV, and other formats to ingest, normalise, and send clean invoice data back to its retailers through an integration or daily electronic file. This data includes both product and vendor details. Fintech’s new developments also include its proprietary Invoice Builder tool for smaller vendors without e-invoicing capabilities. Using this tool, invoices can be created and uploaded inside the portal by the vendor, or retailers can choose to scan and upload an invoice, which leverages optical character recognition to capture the invoice data.


Elavon and Woo to elevate small business payments offering

Elavon has announced it will work with Woo to help micro and small businesses accept online payments. Woo is the maker of WooCommerce, an open-source e-commerce platform built on WordPress. The agreement means the Elavon payments extension will now be available on Woo-supported e-commerce stores in Poland, Germany, the UK, Ireland, Sweden, Denmark, Norway, Belgium, Spain, and the Netherlands.

Installing the Elavon extension gives WooCommerce merchants instant access to payment services from Elavon, enabling them to take online payments using a reliable and secure payment solution. The solution could help small and medium businesses (SMBs) grow into additional markets.

The extension will be free to download on the WooCommerce Marketplace. Elavon will directly manage all merchants using the new extension.

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