West Midlands confidence up for third month running - Lloyds Bank business confidence

Business confidence in the West Midlands rose four points during August to 42 per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in the region reported lower confidence in their own business prospects month-on-month, down eight points at 43 per cent. When taken alongside their optimism in the economy, up 17 points to 42, this gives a headline confidence reading of 41 per cent.

West Midlands businesses identified their top target areas for growth in the next six months as evolving their offer (54 per cent), investing in sustainability (36 per cent) and introducing new technology (35 per cent).

Read more: South West business confidence hits highest level this year - Lloyds Bank

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

A net balance of 22 per cent of businesses in the region expect to increase staff levels over the next year, down four points on last month.

Overall UK business confidence increased to its highest level since February last year, jumping 10 points to 41% in August. All 11 regions and nations reported a positive business confidence reading in August, with nine regions and nations reporting a higher confidence reading month-on-month.

Optimism in the UK economy also increased in August by 16 points to 37 per cent, and the number of businesses expecting an increase in their trading prospects rose by three points to 46 per cent.

Businesses in London reported the highest levels of business confidence at 52 per cent (up 20 points month-on-month), its strongest reading in 14 months. Firms in the South East reported the second highest reading at 47 per cent (up 17 points month-on-month), followed by those in the South West at 46 per cent (up 12 points month on month).

The construction, retail and service sectors all saw a rise in business confidence in August. Services gained 12 points to reach a 22-month high of 42 per cent, while retail firms were up nine points to 44 per cent, an 18-month high.

Construction firms’ confidence also increased by 11 points to a four-month high of 42 per cent. In contrast, manufacturing confidence fell for a second consecutive month with a 4-point decline to 30 per cent, taking it to the lowest level since April 2023.

Dave Atkinson, regional director for the West Midlands at Lloyds Bank Commercial Banking, said: “It’s good to see business confidence remain strong in the West Midlands this month as firms set their sights on future growth.

'I know from speaking to businesses in the region that many see opportunities in introducing sustainability measures, but high inflation is affecting their ability to invest in Net Zero.

"Those firms can take advantage of discounted lending via tools such as the Clean Growth Financing Initiative.

“For those struggling to manage higher costs, assessing working capital can be useful in identifying areas where savings can be made and cash can be freed up to reinvest in the business.”

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Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “The bounce in economic optimism this month is the standout point. Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact.

"With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.

“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”