More reasons to be cheerful as confidence returns to the UK

CONFIDENCE is continuing to return to the British economy, with new data pointing to a welcome upswing in both sentiment and performance.

An increasing majority of households are now feeling upbeat on the UK economy, according to the latest figures from YouGov, the third month in a row that positive views have outweighed negative ones.

The numbers – which measure confidence about household finances, job security and house prices – also show people feel more secure in their jobs now than at any point since the survey began in 2009.

Meanwhile, separate figures released yesterday showed that the UK’s struggling construction sector has finally returned to growth. The building industry expanded in May for the first time this year after shrinking by 8.1 per cent during 2012.

The latest Markit purchasing managers’ index increased to 50.8 in May from 49.4 the month before after house building initiatives boosted firms, leading to the quickest rise in output in 26 months.

It builds on positive manufacturing figures from Monday, which showed the sector growing at its fastest pace in 14 months.

And foreign money is pouring into UK projects, rising 2.7 per cent in the past year according to Ernst & Young, and making Britain the favoured destination in Europe for investors. Their enthusiasm has been driven by a marked improvement in global opinions of Britain’s competitive position.

The number of companies satisfied with British labour costs rose from 48 per cent to 63 per cent, data showed, and approval of the tax system rose from 53 per cent to 61 per cent.

Some regional rebalancing was also indicated: while London still leads the pack, the number of projects in Scotland, Wales, Northern Ireland and the north of England have all improved, Ernst & Young said.

And there is also good news for squeezed consumers. The British Retail Consortium said this morning that shop prices fell in May for the first time in three and a half years.

The overall drop of 0.1 per cent was led by falling costs for non-food items, while food inflation slowed to 2.4 per cent – its lowest level since June 2010.