Business confidence buoyed by economic optimism

30-Nov-2018

Business confidence increased across the UK during November, helped by stronger economic optimism, according to the latest Business Barometer report from Lloyds Bank Commercial Banking.

The overall increase in business confidence – up by five points to 24% – reversed part of the 10-point drop seen in October.

The net balance of firms reporting higher economic optimism increased by nine points to 17%, and businesses expecting stronger trading prospects also rose by two points to 31%, resulting in an overall increase in business confidence.

Hann-Ju Ho, senior economist at Lloyds, commented: “These results are reassuring, but it’s still not clear if this month’s improvement will be sustained. There has still been a continued gradual decline in business sentiment levels, and these findings support our forecast for UK GDP growth to ease back in Q4.”

Uncertainty about the outcome of Brexit negotiations and the details of a deal continue to impact business confidence. Although 30% of firms said Brexit was expected to have a positive impact on their business, up from 27% last month, 36% said they thought Brexit would have a negative impact, resulting in a net balance of  6%, compared with 7% in October and +9% in September. Concerns about the impact of leaving the EU were the highest in manufacturing and other sectors such as business and financial services and health and education.

Firms in Scotland, Northern Ireland and the south east reported the highest net concerns about the impact of the UK leaving the EU, while those in Yorkshire and the Humber, the north west and the West Midlands were the most positive.

Overall business confidence – economic optimism and confidence in trading prospects – increased the most in manufacturing, rising by 11 points to 32%, with the construction industry also registering a significant improvement, up by seven points to 29%. Retail confidence moved up one point to 30%.

There was a noticeable increase in overall confidence in firms across all regions, with the exception of the north west, London, the East Midlands and the south east. Firms in Yorkshire and the Humber and the West Midlands displayed the best overall business confidence, the former up 26 points to 43%, and the latter up 17 points to 40%, with firms in Scotland and the East Midlands displaying the lowest confidence.

By contrast, the two previously strongest regions in October saw a fall in confidence, with the north west down 16 points to 20%, and London down three points to 34%.

Despite drops in business confidence across the capital, London still remained among the top three regions for business confidence.

Expected staffing levels for the coming year remained steady in November, with the net balance expecting a rise in employment unchanged at 21%. In all, 39% of firms said they expected to add to their staffing levels, while 18% anticipated a reduction. Recruitment intentions have eased since the start of the year, partly reflecting lower overall business confidence.