Decline in trading and economic optimism among West Midlands firms - report

Business confidence in the West Midlands fell 10 points during August to 47 per cent, according to the latest Business Barometer from Lloyds.

Companies in the West Midlands reported lower confidence in their own trading outlook month-on-month, down 12 points at 53 per cent.

When taken alongside their optimism in the economy, down nine points to 40 per cent, this gives a headline confidence reading of 47 per cent (vs. 57 per cent in July 2026).

A net balance of 33 per cent of businesses in the region also expect to increase staff levels over the next year, down 25 points on last month.

Looking ahead to the next six months, West Midlands businesses identified their top target areas for growth as introducing new technology (43 per cent), such as AI or automation and entering new markets (41 per cent).

Business confidence in the West Midlands now sits below the 12-month average of 53 per cent, with its highest figure of 66 per cent in March 2026.

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

Graham Fitzpatrick, regional director for the West Midlands, said: “Another fall in confidence shows that West Midlands businesses are feeling the pressure of a more uncertain operating environment.

“But sentiment can shift quickly, and the region has repeatedly demonstrated its ability to respond to changing conditions. 

“We’ll continue to support the region’s businesses as they continue to seek growth.”

Overall, UK business confidence increased four points in August to 53 per cent, the highest reading since the start of the Middle East conflict in March (55 per cent) and above the 12-month average of 47 per cent.

This was driven by a second month-on-month increase in economic optimism, up 18 points since June.

Optimism in the wider economy rose seven points to 49 per cent, compared to a 12-month average of 37 per cent.

Of those surveyed, 64 per cent said they were optimistic (up five points from July) in the wider economy, while those who felt pessimistic decreased by two points to 15 per cent.

The main factors cited by firms who felt more positive included stronger customer demand and improving financial conditions.

Businesses’ own trading outlook improved two points to a three-month high of 58 per cent in August, compared to a 12-month average of 56 per cent.

Sixty-six percent of firms (up one point from July) expect an increase in output over the year ahead, while those expecting a decrease in activity reduced by one point to 8 per cent.

Among firms expecting stronger activity, the main factors were stronger customer demand, increased investment in capacity or tech and improved supply chain conditions.

Amanda Murphy (pictured), CEO Lloyds Business and Commercial Banking, said: “It's encouraging to see business confidence rise for the second month in a row, reaching its highest level since March.

"While international firms remain more confident, it’s good to see domestic companies register a strong month-on-month increase. 

"Overall, businesses are reporting stronger customer demand, greater optimism about the wider economy and growing confidence in their own trading outlook, all of which will be helping to support investment and growth plans.

"While businesses continue to operate in a challenging environment, easing cost pressures and fewer firms expecting to raise prices in the coming year, should allow them to focus less on managing headwinds and more on pursuing growth."