DENT IN CONFIDENCE AMONG LONDON BUSINESSES

Business confidence in London fell 28 points to 35% in June, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the capital reported lower confidence in their own business prospects month-on-month, down 29 points at 39%. When taken alongside their optimism in the economy, down 28 points to 30%, this gives a headline confidence reading of 35%.

London businesses flagged a range of growth opportunities for the next six months, including investing in their team (39%), diversifying into new markets (37%) and evolving their offering (30%).

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

A net balance of 39% of businesses in the region expect to increase staffing levels over the next year, down 29 points on last month.

Across the UK, business confidence fell 10 points during June to 28%. Firms’ optimism in the economy dropped 12 points to 21%, while their outlook on their future trading prospects was down eight points, at 34%. The net balance of businesses planning to create new jobs also decreased, by nine points, to 28%.

Every UK region and nation reported positive confidence readings in June. However, all except the East of England (up 17 points to 31%) recorded a lower reading than last month. Alongside London, the West Midlands (down 23 points to 30%) and Scotland (down 15 points to 27%) reported the largest decreases month-on-month, with the North West (down two points to 42%) now the most optimistic region overall.

Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Despite a sizeable drop in confidence firms in London remain more optimistic than many other parts of the UK, highlighting the relative strength of the capital’s economy. The traditional summer season is in full swing for many businesses and the hospitality and retail sectors in particular will be looking to make the most of increasing demand from tourists.

“However, as inflation continues to rise, businesses will need to maintain an element of caution. The answer for many will be to mitigate price rises by managing cashflow carefully and planning ahead to mitigate price and demand volatility in future.”

Confidence among businesses in the manufacturing and construction sectors fell, bringing them close to the UK all-sector average, at 32% and 30% respectively, reflecting lower optimism in the economy. Service sector confidence declined to its lowest in a year, at 25%, showing weaknesses in hospitality, though offset by stronger confidence in business services. Confidence in retail businesses edged up this month four points from 27% to 31%.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence declined this month, suggesting that the momentum for growth is moderating. Firms remain broadly positive but face several challenges ahead, including concerns around higher costs and slowing demand. If these trends continue, businesses may have less scope to pass on higher costs to support their margins.”