Well over a third (38%) of business leaders in the UK say they plan to increase their workforce over the next 12 months according to the annual UPS Europe Business Monitor.

It is the highest prediction since the question was first asked in 1993 and up 2% on last year's results. An additional 46% plan to keep their workforce about the same as it is now, meaning 84% of senior UK executives predict a stable or growing employment situation in the coming year. The UK's employment optimism is mirrored by confidence in the general economic climate; with over half of respondents (56%) reporting that the economic position of their company is better than it was 12 months ago and only 8% reporting that it is worse. The net result (the number reporting a better position minus those reporting worse) is 48%, up a significant 9 points on last year (39%) and 4 points ahead of the European average (44%). The outlook for 2008 is equally optimistic, as 55% of UK business leaders surveyed predict the economic position of their company will be better in 12 months' time.

Business leaders across Europe identify global competition as the biggest challenge to business growth - 48% of all respondents think this is one of the most critical issues, ahead of the cost of labour (46%), high fuel and energy costs (41%) and lack of skilled workforce (32%). Compliance with EU regulations and a strong local currency were seen as the next biggest challenges (both 26%), followed by labour regulations (20%), corporate tax (18%) and finally protectionism (10%).

The UK identified lack of skilled workforce as an issue more than any other country surveyed, followed by the Netherlands (40%) and Germany (37%). Italy seemed to have the most confidence in the skills of its workforce, only 15% reported this to be a big challenge to business growth.