LONDON BUSINESS CONFIDENCE FALLS IN AUGUST

Business confidence in London fell 14 points during August to 21%, 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 47 points at 0%. When taken alongside their optimism in the economy, down 20 points to 3%, this gives a headline confidence reading of 21%.

London businesses identified their top target areas for growth in the next six months as investing in their teams (40%), evolving their offering (36%) and entering into new markets (32%).

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

A net balance of nearly a quarter (24%) of London businesses expect to increase staff levels over the next year, down nine points on last month.

Overall UK business confidence fell nine points during August to 16%. Firms’ outlook on their future trading prospects was down 32 points to 5%, and their optimism in the wider economy dropped six points to 6%. The net balance of businesses planning to create new jobs also decreased five points to 16%.

While every UK region and nation reported a positive confidence reading in August (except the South East, where confidence dropped 15 points to 0%), only three recorded a month-on-month increase in optimism. The three regions were the North West (up 26 points to 44%), South West (up 12 points to 23%) and Yorkshire (up nine points to 23%), with the North West now the most optimistic region overall.

Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “August has been another challenging month for London’s businesses, facing extreme weather conditions that forced some firms to temporarily close their doors due to either rising temperatures, or flooding. On top of continuing inflation, these headwinds mean companies again need to show the resilience that has served them so well during the last two years.

“Maintaining a steady cash flow is essential to remaining agile and alert to cost pressures, and firms have a number of options here to plan for different scenarios and expected impacts on their finances. We’ll be by their side to help them explore and implement these, so they can navigate the challenges ahead.”

Business confidence declined across all four sectors in August. Confidence within the retail sector declined the most this month (13%, down 18 points), with the service sector also seeing a significant nine-point decrease (15%). Other sectors saw moderate decreases, with manufacturing down by four points (16%) and construction (26%, a fall of two points), in line with recent trends.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence declined for a third consecutive month as firms continue to face economic challenges in the period ahead and as inflation concerns intensify. Despite edging lower this month, the outlook for both wage and price pressures remains elevated. However, there are some brighter points as the demand for staff remains positive, and firms reported lower concerns about staffing issues and the pandemic.”