Retail business confidence has risen for the first time in four quarters as store groups expect improvements in gross profit and turnover this year.

According to the ICAEW/Grant Thornton UK Business Confidence Monitor, confidence levels among retailers stood at 8.1 points for the first quarter of this year , above the 1.7 points recorded in the final quarter of last year, which was a 12-month low for the Index.

Although confidence has risen quarter-on-quarter, the level is still well down on the high of 27.6 points recorded in retail this time last year.

However, retailers expect gross profits to increase by 4.2% in the coming year, compared to the 2.8% increase seen in the last 12 months.

Store groups anticipate sales volumes to jump 4.9% this year, compared with 3.4% last year.

Retailers also expect to increase employee numbers by 1.3% over the next 12 months.

However retailers expect a larger increase in prices over the next 12 months compared to the average expected across all business sectors. Store groups expect prices to rise 2.4%, compared to an average across all businesses of a 1.3% increase.

Retailers remain jittery over the outlook for the general economy, with just 38% of retailers more confident about the next 12 months, compared to a national average over all business sectors of 44%.

Grant Thornton head of retail Barry Knight said: “Confidence in the sector seems to be holding up reasonably well, and it is encouraging to see that the three quarter long trend of falling confidence has been curbed.

“The expectations for improved financial performance over the coming year may not be fulfilled however, reflecting the difficult trading climate the industry is facing at the moment.

“The more positive outlook expressed by respondents could possibly have been driven by a short term boost in optimism as the worst impacts of the bad weather faded and relatively strong sales resumed in January.

“Another issue to note is the difference in outlook for ‘bricks and mortar’ compared to online retailers. Pure online players and smaller retailers with a strong online offering are still optimistic about sales and expect growth, which is not the case for more traditional firms in the sector.

“As a result, we expect a rise in the number of retail failures during the year, counterbalanced by aggressive expansion for the more successful retailers.”