South West business confidence falls, according to Business Barometer

Business confidence in the South West has fallen 16 points since May to 25 per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the region report lower confidence in their business prospects at 25 per cent and lower economic optimism at 24 per cent.

Together, this gives an overall confidence of 25 per cent, which is 16 points below last month’s figure of 41 per cent.

Companies’ hiring intentions show a net balance of 28 per cent of businesses in the region expect to hire more staff during the next year, down six points on last month.

Nationally, overall confidence fell six points to 29 per cent, as firms’ optimism about the economy dipped, weighing down their confidence in their own business prospects.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

Joanna Costin, regional director for the South West at Lloyds Bank Commercial Banking, said: “Continued uncertainty over factors including interest rates and future trading relationships is weighing heavy on companies’ confidence in their own prospects.

“Meanwhile, falling optimism about the economy overall is also dragging down business confidence across the UK.

“But the fact that these concerns are having a more muted impact on firms’ plans to hire more staff suggests that they are actually more resilient than the headlines suggest.

“As we gain more clarity regarding our economic future over the coming months, we expect to see businesses become more willing to invest in growth, and confidence levels to rise accordingly.”

Across the region, a net balance of 11 per cent of businesses say they feel the UK’s exit from the European Union is having a positive impact on their expectations for business activity. This contrasts with a net balance of three per cent who felt it was having a negative impact a month ago.

Meanwhile, a net balance of 55 per cent of companies in the region expect the Bank of England to increase interest rates this year, with the average* firm indicating that raising rates to 1.5 per cent would have a significant negative impact on their business.

Regional picture

Outside London, which is the most confident region at 40 per cent, confidence is highest in the North of England, where overall confidence is at 35 per cent in each of the North East, North West, and Yorkshire.

Businesses in the South East are least confident, with an overall confidence of 15 per cent, 14 points below the national average.

Sectors

Confidence is strongest among transport and communications services businesses, at 50 per cent and 48 per cent respectively, while construction rose five points to 45 per cent.

Elsewhere, manufacturing firms report increased confidence at 35 per cent, compared with 31 per cent last month, but confidence among consumer firms fell 11 points to 29 per cent. Confidence in business and finance stands at 25 per cent, and at 22 per cent in retail.

Commenting on the drop in confidence levels across the UK, Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “Increased global trade tensions and Brexit uncertainties are likely to have weighed on confidence, but it’s still near the long-term average and so there’s no need to hit the panic buttons.”