South East business confidence dips but remains in the black

Business confidence in the South East fell for a second month in a row, dropping four points during July to 27%, according to the latest Business Barometer from Lloyds Bank Commercial Banking. 

Companies in the South East reported lower confidence in their own business prospects month-on-month, down four points at 26%. When taken alongside their optimism in the economy, down three points to 28%, this gives a headline confidence reading of 27%.

The Business Barometer questions 1,200 businesses monthly, including 144 businesses in the South East, and provides early signals about UK economic trends both regionally and nationwide.

A net balance of 11% of businesses in the region expect to increase staff levels over the next year, down five points on last month. 

Overall, UK business confidence dipped three points to 30% in July but remains well above the year-to-date average of 19%. Businesses in the North East (40%), East Midlands (38%) and North West (38%) were the most optimistic overall.

In July, four regions reported an increase in confidence: the North East (up 13 points to 40%), North West (up nine points to 38%), East Midlands (up seven points to 38%) and West Midlands (up one point to 30%), while the remainder reported a drop. 

Scotland (down 14 points to 28%), East of England (down 11 points to 25%) and Wales (down nine points to 12%) reported the biggest falls in confidence but all retained an overall positive reading.

The overall number of UK firms expecting planning to create new jobs in the next twelve months rose one point to 18% in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen.

Paul Evans, regional director for the South East at Lloyds Bank Commercial Banking, said: "As lockdown restrictions are lifted, businesses across the region continue to remain positive about their future trading prospects despite the slight drop in confidence compared with recent months.

"The ongoing concerns around labour shortages continue to impact the region’s well-renowned hospitality and leisure sectors, yet it’s encouraging to see businesses cement their intentions to increase staffing levels over the next year."

Confidence fell slightly in the broad economic sectors in line with the overall economic picture. Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33% (down from 35%) for manufacturing and 32% (down from 36%) for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33% (from 35%) and 28% (from 31%), respectively. 

In the subsectors, confidence was particularly strong in hospitality (63%, up from 38%), and transport (53%, up from 37%), reflecting the further opening of the economy, as well as in business services and finance. Employment and pay growth expectations were also especially strong in these subsectors as well as in construction. 

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: "A sixth consecutive monthly increase in employment expectations alongside an increase in pay growth predictions continues to highlight the resilience of UK businesses despite a slight dip in overall business confidence. With Covid-19 restrictions having now been significantly eased in parts of the UK, we can have further confidence in firms’ outlook for the UK economy."

The Business Barometer

• The Business Barometer’s measure of overall business confidence is the average of responses about how businesses regard the economic outlook and their own trading prospects.
• The overall 'balance' of opinion weighs up the percentage of firms that are positive in outlook against those that are negative. Responses are weighted to reflect the composition of the economy.
• The industrial sector in this report represents mainly manufacturing and construction; the consumer services sector comprises distribution and transport and communications; business and other services consists of financial and business services and the public sector.
• The Business Barometer results provide early signals about UK economic trends. The survey started in January 2002 and research is carried out monthly on behalf of Lloyds Bank by BVA BDRC.
• This survey was conducted with 1,200 companies – including 144 businesses in the South East  – between 1st and 15th July 2021