Business confidence in South East reaches highest level in 12 months

Business confidence in South East rose 19 points during May to 30% – matching levels last recorded in April 2022 – according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the South East reported higher confidence in their own business prospects month-on-month, up eight points at 33 per cent. When taken alongside their optimism in the economy, up 30 points to 26 per cent, this gives a headline confidence reading of 30 per cent. 

The region’s businesses identified their top target areas for growth in the next six months as evolving their offer (36 per cent), investing in their team (35 per cent) and diversifying into new markets (31 per cent).

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

Just under a quarter of businesses in the region expect to increase staff levels over the next year, up five points on last month.

Overall UK business confidence dropped five points to 28 per cent in May. Despite the dip, every UK nation and region report a positive confidence reading.

As the country celebrated the Coronation, London reported the highest levels of business confidence at 43 per cent (down four points on last month), followed by the North East at 35 per cent (down six points month-on-month). The West Midlands and South West also reported high readings in May, at 30 per cent alongside the South East. 

Firms remain optimistic about their own trading prospects, with 34 per cent expecting business activity to increase over the next 12 months, down just five points on last month. 

Paul Evans, regional director for the South East at Lloyds Bank Commercial Banking, said: “Confidence hitting the highest levels in the South East for more than a year will yield an enormous sigh of relief. But I hope it will also inspire firms to seize on the momentum to drive a long summer of confidence in the region.  

“Capitalising on this confidence will require speedy but strategic investment, which relies on having strong levels of working capital. I know that we’re already seeing increased demand for solutions like asset finance, so that businesses can fund the investments that will help them tap into growth without restricting cashflow. We’ll continue to support the South East’s firms to identify and invest in these opportunities and maximise growth.”

Confidence among manufacturers increased to a one-year high of 40% (up from 29%), while retail registered a more modest two point rise to 26%, and construction remained robust at 34% despite its monthly nine point decline. Services confidence, however, fell back to 26% from 36%, almost erasing last month’s rise. Overall, confidence across the broad sectors remains above levels at the start of the year.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.

“However, while firms’ trading prospects and economic optimism both eased back, they still remain in positive territory as the UK has avoided an outright contraction in GDP - indicating a certain amount of underlying resilience in the economy.”