Business confidence in the North East rose in the last six months, according to the latest Business in Britain report from Lloyds Bank, based on data gathered after the snap election had been called.

The confidence index – an average of respondents’ expected sales, orders and profits over the next six months – increased to 33 per cent, from January’s score of 22 per cent.

The Business in Britain report, now in its 25th year, gathers the views of more than 1,500 UK companies, predominantly small to medium sized businesses, and tracks the overall “balance” of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

The North East is feeling optimistic compared with Yorkshire and the Humber but falls behind Wales in terms of confidence.

Leigh Taylor regional director for SME in the North East, Lloyds Banking Group said: “Overall confidence in the North East has increased since our last survey in January. The fact that this has happened despite the political uncertainty from a snap election is a positive sign for underlying confidence in the region.”

Overall, the share of North East firms naming weaker UK demand and political uncertainty as potential threats edged higher to 12 per cent and 22 per cent respectively, but both are little changed from a year ago.

The proportion of North East firms that said that they had experienced difficulty in recruiting skilled labour in the last six months, however, increased to a ten-year high of 49 per cent, compared with 33 per cent in January.

The share of firms reporting challenges in recruiting unskilled labour also rose to 32 per cent from 15 per cent.

Despite recruiting challenges, the net balance of firms expecting average pay to rise in the next six months rose slightly to 29 per cent from 26 per cent.

Leigh added: “Despite hurdles in recruiting both skilled and unskilled labour, North East businesses also anticipate sales, profits, and staffing levels to rise.

“The outlook for the external environment remains mixed, with details of Britain’s exit from the EU still to come but businesses have been working within those parameters for a while now. For the moment, North East businesses are taking this in their stride until there is a clearer sense of what it will mean for them in the short and medium term.”

North East companies remained positive about export prospects. The net balance of firms in the region expecting higher total exports in the next six months stood at 16 per cent, albeit sharply down from the net balance of 45 per cent in January. They were most upbeat about export prospects to Asia Pacific (26 per cent) and Africa (26 per cent) followed by Latin America (11 per cent).

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “Although the pound’s value is seen as nearer ‘fair value’, currency volatility remains a big concern for some UK businesses that trade internationally. We have already seen some significant currency moves after the general election.”