South East: Region's business confidence on the rise, reports Lloyds Bank

The latest Business in Britain report from Lloyds Bank indicates that business confidence in the South East has improved, even as economic uncertainty remains the biggest threat to firms. The report’s confidence index – an average of respondents’ expected sales, orders and profits over the next six months – has risen to 15%, up from the 10% in September 2016. Confidence in the South East is higher than that in both London and the Midlands.

The most commonly identified threat cited by firms in the South East for the coming six months is economic uncertainty (30%), followed by weaker UK demand (16%) as firms wait for further details of Britain’s EU exit.  Companies also cited political uncertainty (9%), input costs (6%), access to skills (6%) and regulations (5%) among the biggest threats to their business.

Ian Patterson, regional director SME banking in the South East, Lloyds Banking Group, said: “It is encouraging to see business confidence increasing in the South East. As we start the new year firms are concerned about economic uncertainty but are optimistic and ready to take on new challenges.”

Overall, the net balance of firms anticipating stronger export sales in the next six months increased marginally to 25% from 23% in September. 

This upturn was led by a big increase in the number of firms anticipating stronger exports to Latin America and Asia Pacific.

Businesses indicated that the current exchange rate is favourable for their export sales because the pound is at its weakest since its last big depreciation in 2009 during the global financial crisis. The weaker pound also contributed to a rise in firms’ pricing intentions. The net balance of firms expecting to increase their prices in the coming six months increased to 23% from 15%.

The region’s firms are expecting to raise their staffing levels in the next six months, with a net balance of 4% planning to recruit new staff, up from 0% in September. The share of firms saying they are experiencing difficulties in recruiting skilled labour has fallen to 30% from 37% in September.

Hann-Ju Ho, senior economist, Lloyds Bank commercial banking, said: “The weaker pound has given a huge boost to exporters as they look beyond their traditional export markets of the US and Europe. However, this has also led to a jump in the number of firms intending to raise the price of their goods and services in response to higher costs. As a result, we would expect inflationary pressures to rise this year. The relatively low levels of investment and recruitment intentions also suggest that economic growth is likely to slow in the next six months.”  

The Business in Britain report from Lloyds Bank, now in its 25th year, gathers the views of more than 1,500 UK companies, predominantly small to medium-sized businesses, and tracks the overall balance of opinion on a range of important performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.