Business confidence drops 25 points in September

Business confidence in the South West fell 25 points during September to 21%, the lowest level in six months, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South West reported lower confidence in their own business prospects month-on-month, down 23 points at 26%. When taken alongside their optimism in the economy, down 27 points to 16, this gives a headline confidence reading of 21%.

South West businesses identified their top target areas for growth in the next six months as evolving their products and services (40%), investing in their teams (31%), and diversifying into new markets (21%).

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

A net balance of 10% of businesses in the region expect to increase staff levels over the next year, down 25 points on last month.

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Overall UK business confidence fell five points in September from 41% to 36%. Firms’ outlook on their own trading prospects remained strong at 41% despite a five-point drop on last month, and their optimism in the UK economy also remained robust at 30%, down by seven points on August’s reading.

Businesses hiring intentions remained upbeat with 26% of firms reporting plans to increase their staff levels over the next year, down five points on last month.

Companies in London reported the highest levels of business confidence for the second consecutive month at 44% (down eight points month-on-month). Firms in Yorkshire reported the second highest reading at 40% (up eight points month-on-month), followed by those in the North West at 38% (up four points month on month).

The fall in business confidence this month centred around the retail and services sectors, following strong sentiment in August.

Retail confidence fell to 32% (down 12 points) dragged down in particular by trading prospects, while services confidence declined to 36% (down eight points). Construction confidence also fell to 36% (down eight points). However, manufacturing was stronger, with confidence rising to a three month high of 36% (up six points).

Amanda Dorel, regional director for the South West at Lloyds Bank Commercial Banking, said: “Despite a drop in confidence for South West businesses, it encouraging to see firms looking within their own operations for growth opportunities. It’s fantastic that many firms exploring their product and service offering too as they gear up for a busy final quarter of the year.

“As consumer confidence improves, businesses in the region will be looking to capitalise on the opportunities that an increase in spending could bring their way. Those who keep a close eye on margins, and manage their working capital effectively will be best placed to take advantage of these opportunities”

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “While the gains in business confidence we saw in August have not been maintained, it’s important to see the wider trend clearly reflected in the data which paints a very different picture to this time 12 months ago, when the economy was in significant difficulties.

“Despite some month-to-month movements, if you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and now an average of 27% in the third.

“Although the economic environment remains uncertain with inflation and interest rate pressures playing their part, the recent decision by the Bank of England to leave interest rates unchanged is likely to help businesses feel more upbeat about the future, which may underpin confidence in the last three months of the year.”