London remains most confident region as firms report surge in prospects

Business confidence in London rose 16 points during October to 49%, meaning it remained the highest of all UK regions and nations, according to the latest Business Barometer from Lloyds Bank Commercial Banking – conducted between 3rd-17th October.

Companies in the capital reported higher confidence in their own business prospects month-on-month, up eight points at 54%. When taken alongside their optimism in the economy, up 22 points to 42%, this gives a headline confidence reading of 49%.

London’s businesses identified their top target areas for growth in the next six months as investing in their teams (57%), evolving their offering (40%) and investing in sustainability (39%).

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

A net balance of 40% of London businesses expect to increase staff levels over the next year, up 13 points on last month.

Overall UK business confidence fell one point during October to 15%, in line with the average over the last three months. Firms’ outlook on their future trading prospects was up two points to 27%, and a net balance of 21% are planning to create new jobs, up four points on last month. However, businesses optimism in the wider economy dropped three points to 2%.

Five UK regions and nations recorded a month-on-month increase in optimism in October. After London, the North West (up 14 points to 28%), Wales (up nine points to 5%), West Midlands (up eight points to 27%) and East of England (up eight points to 9%) all saw monthly increases.

Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “London businesses are ahead of the pack when it comes to confidence in their trading prospects and optimism about the future, which is testament to the resilience and buoyancy of firms in the face of particularly difficult headwinds.

“What’s even more encouraging is London businesses’ increasing desire to invest in sustainability and to play their part in the transition to a net-zero future and, anecdotally, we know many are looking at this as part of their investment plans for next year.

“We’re here to help. Our Clean Growth Financing Initiative, which offers discounted lending to companies investing in sustainability, is just one of the tools that can support firms as they work towards their green ambitions.”

Business confidence in the manufacturing sector fell for the fifth month in a row, to 13%, down 1 percentage point, the lowest confidence level since February 2021. Confidence in the retail sector declined by 6 percentage points to 9%, while confidence in the services sector also fell to 16%, both the lowest levels since early 2021.

However, the construction sector saw a 10 percentage point rise to 20%, although this level still remains weaker than in the first half of the year.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While business confidence has marginally fallen this month, along with a drop in forward looking economic optimism, it is encouraging to see businesses still looking to increase their headcounts. However, cost pressures remain evident as businesses raise prices to protect their margins and wage pressure continue to be impactful. Given the recent turbulence in financial markets, it will be interesting to see how this will affect business confidence.”