British businesses started 2024 with their confidence at the highest level in nearly two years but their plans for more staffing are not translating into accelerating wage growth, according to a survey published on Wednesday.

In a report likely to be welcomed by the Bank of England as it readies its latest interest rate decision, the Lloyds Bank Business Barometer jumped by nine points to 44% this month, its strongest since February 2022.

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said weaker inflation and hopes of interest rate cuts pushed the index to its highest level for the month of January since 2016.

"With ongoing geopolitical issues and a general election on the horizon, businesses will have factored these into their risk radars and will be working to prepare for any potential impacts on their trading prospects," he said.

"Also, half of all companies say they’re planning to increase headcount in the coming year. Despite that and the changes to minimum wage that will come into force in April, expectations for staff pay fell back following last month’s increase."

A measure of staffing plans increased by four points from December to 33% but pay expectations eased back and the share of firms expecting to increase wages by 4% or more over the next 12 months was the lowest for five months.

However, longer-term wage growth expectations remain above their pre-coronavirus pandemic levels.

Companies scaled back plans for increasing the prices they charge for a second month in a row, the first back-to-back decrease since June 2022, Lloyds said.

The BoE is expected to keep borrowing costs at their highest level since 2008 on Thursday but investors, economists and businesses will be watching for any signs that rate cuts might be coming later in 2024.

The Lloyds survey typically includes responses from 1,200 firms and was conducted between Jan. 3 and Jan. 17.

(Reporting by William Schomberg; editing by Christina Fincher)