West Midlands businesses optimistic ahead of Omicron impact - Lloyds
Business confidence in the West Midlands fell 12 points during December to 30 per cent, the biggest fall of any UK nation or region, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the West Midlands reported lower confidence in their own business prospects month-on-month, down 19 points to 27 per cent. When taken alongside their optimism in the economy, down four points to 33 per cent, this gives a headline confidence reading of 30 per cent.
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
The survey captured responses between 26 November and 10 December. The first two cases of Omicron in the UK were confirmed on 27 November and nations began announcing the reintroduction of restrictions in the week commencing 6 December.
A net balance of 36 per cent of businesses in the region expect to increase staff levels over the next year, up five points on last month.
Overall UK business confidence was unchanged from November 's reading at 40 per cent. While confidence remained above the long-term average (28 per cent), during the second week of sampling when the Omicron variant emerged, confidence fell to 32 per cent.
Despite potential challenges from the new Covid-19 variant on the horizon, firms remained positive about their future trading prospects, up four points month-on-month to 43 per cent. The net balance of businesses planning to create new jobs also increased by three points to 33 per cent. Optimism in the economy overall remained positive at 38 per cent, down just three points on November 's result.
Amanda Dorel (pictured), regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “It 's been a turbulent year for businesses so it 's reassuring to see the last confidence survey of the year report a positive reading. But with Omicron looming, and potential for further restrictions to come, we could see confidence fall further in the coming weeks.
“Many businesses, particularly in the retail and leisure industries, are now planning on how they will navigate the latest disruption, while the region 's manufacturers will hope the new variant doesn 't make existing trade issues worse. Whatever happens, we 'll be by their side in the year ahead. ”
In the industry sectors, construction recovered to 39 per cent from November 's seven-month low of 28 per cent, following a minor easing in supply-chain disruptions. Despite a slight fall in confidence in manufacturing to 40 per cent, trading prospects in the sector have remained higher than the whole economy throughout this year.
There were also small declines for retail (43 per cent) and services (39 per cent) ahead of the festive period. There have been some marked differences in these sectors in recent months, with notable strengths in the professional services sector (including finance) and in IT/communications. However, the current three-month average sentiment among hospitality firms is at its lowest level (24 per cent) since the first quarter of the year (4 per cent). This has been fuelled by a significant monthly drop of 48 points to 6 per cent between November and December.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “It is a challenging end to 2021 as businesses are now having to adapt to the new Omicron variant and resultant restrictions across the UK. Nevertheless, business confidence remains resilient and above the long-term average due to a rise in trading prospects, while pay and price expectations continue to be elevated.
“Businesses face into a number of headwinds and challenging trading conditions, including higher interest rates, as we move into 2022, but many remain resilient and hopeful that acute downside risks are not realised. ”