Small business owners are becoming increasingly optimistic about the next few months.

According to Lloyd’s latest business barometer, confidence among smaller firms with turnover below £1m rose by 11 points to 48% in July.

And even more positively, this is reflective of a wider trend.

Overall, business confidence rose by five points to 49% last month.

That’s a four-month high and two points higher than the 12-month average of 47%.

What’s behind the improving confidence?

Lloyds believes growing optimism among business leaders has been fuelled by stronger market demand, improving economic performance and better financial conditions.

Commenting on the findings, Amanda Murphy of Lloyds Business and Commercial Banking said: “The stronger confidence we're seeing among smaller businesses and firms focused on the domestic market is particularly encouraging, suggesting more businesses are starting to see opportunities for growth and investment.”

Optimism in the economy grows

At the same time, business owners are becoming more hopeful about the wider economic environment.

In fact, optimism in the wider economy went up by 11 points to 42%.

That compares with a 12-month average of 37%, and was again driven by growing customer demand and better economic news, as well as improving interest rates.

Ms Murphy acknowledged that “challenges remain” for the UK’s business community.

However, she said the findings suggest many firms are “feeling more optimistic about the opportunities ahead”.

“Businesses have remained remarkably resilient in recent months, with many focusing on investing in their future, improving productivity and making sure they’re well placed to respond as market conditions change,” she added.