BUSINESS confidence is booming acording to the latest survey by the Institute Of Directors.

The IOD reports its members' optimism at a four-year high in the Business Opinion Survey, which takes into account factors such as prices, profits and employment levels.

The survey, covering the second quarter of this year, shows 46% of directors optimistic, up from 38%.

Alyson Howard, Chairman of the Kings Hill-based Kent Branch of the IoD, said: "Business optimism and performance continue to improve and this should feed through into continued employment growth.

"Around half our members expect employment in their company will increase this year.

"Only nine percent of our members foresee employment in their company falling.

"As the labour market tightens, upward pressure on wages will be offset to a varying degree by rising productivity, thereby maintaining profitability.

"The Business Opinion Survey shows a balance of 39% of companies stating the trend in profits is up."

The survey also shows company performance is at its highest since the end of 2001. The proportion of companies performing well rose to 71% in the latest survey from 62% previously.

The survey suggested some increase in price pressures with 34% of companies reporting price rises over the coming year would be higher than last year.

However, 14% companies reported that price rises this year would be lower than last year. Around half the companies reported price increases would be about the same.

Alyson Howard said: "The implications for interest rates are clear. If the tighter labour market does trigger higher wage growth, the Bank of England will have further reason to raise interest rates."