Business confidence dips but remains in positive territory

Business confidence in the West Midlands has fallen for the first time since January, decreasing by 12 points during June to 29 per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the West Midlands reported lower confidence in both their own business prospects (down 11 points month-on-month to 26 per cent) and their optimism in the economy (down 15 points to 31 per cent), resulting in a headline confidence reading of 29 per cent.

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

When it comes to jobs, a net balance of 17 per cent of businesses in the region expect to increase staff levels over the next year, down seven points on last month.

Overall UK business confidence remained steady month-on-month at 33 per cent.

Firms reported a small increase in their business prospects up two points to 30 per cent, the highest reading since September 2020. Confidence in the economy dipped marginally by two points to 36 per cent.

Across the UK all regions and nations reported positive confidence readings for the third consecutive month.

Businesses in Scotland (up 27 points to 42 per cent), London (up 17 points to 41 per cent) and the East of England (up ten points to 36 per cent) reported the highest increases in overall confidence.

While confidence remained positive, firms in eight regions reported a month-on-month drop. Yorkshire and Humber (down 14 points to 30 per cent) was the only region to see a bigger decrease that the West Midlands (down 12 points to 29 per cent), while confidence also fell significantly in the North West (down nine points to 29 per cent) and East Midlands (down nine points to 31 per cent).

Amanda Dorel (pictured), regional director for West Midlands at Lloyds Bank Commercial Banking, said: “Recent weeks have been shrouded by uncertainty as a result of the new Delta variant and the expected delay to 'freedom day ' will have likely dampened firms ' confidence about the coming months.

“While we hope that the road to a full easing of restrictions is smooth, we have seen that it can be hard to predict what is round the corner. We will remain by the side of businesses across the West Midlands to help them overcome any unexpected challenges they face in the coming months and help them move towards a more stable future. ”

The majority of responses were given before the various UK governments formally announced the delay to the removal of all limits on social contact, which was originally expected to happen on 21 June in England and close to that date in other parts of the UK.

However, it is likely that anticipation of the delay may have had a small negative impact in confidence particularly in the retail sector (down eight points to 36 per cent) while manufacturing also fell (down 18 points to 35 per cent).

Despite this, confidence remains at historically high levels across the broad industry sectors - in part due to services increasing by five points (31 per cent) to its highest level in more than three years and construction remaining steady at 35 per cent.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “A fifth consecutive monthly increase in trading prospects and employment expectations highlights the resilience of UK businesses as they continue to recover from the challenges presented by the pandemic.

“Although we must now wait slightly longer for the last remaining Covid-19 restrictions to ease, it 's an encouraging sign that firms continue to have strong overall confidence in the outlook for the UK economy, as well as their expectations for their own growth prospects. ”