UK business confidence falls for first time in five months

Business confidence in Britain has slumped for the first time since May amid weaker optimism about the wider economy as infections rise and new local lockdown restrictions are introduced.

Lloyds Bank Business Barometer revealed that business confidence in October fell seven percentage points to -18%, with the net balance dropping by 13 points to -23%, and trading prospects dipping one percentage point to -13%.

In addition, business’ evaluation of their hiring intentions also decreased by two percentage points to -18%, well below their pre-pandemic levels of 15%.

While confidence remains above the lowest levels recorded since the pandemic began in March (-33% in May), it is still significantly below the long-term average of 28%.

The service sector suffered the biggest decline in confidence to -24%, driven by a slew of ongoing difficulties for hospitality, arts and leisure companies as they tackle reduced footfall, social distancing measures and store closures.

In contrast, sentiment in manufacturing and retail was marginally higher, rising one point to -7% and three points to -15%, respectively.

Regionally, confidence fell in all but three regions, with the North West, South West and Northern Ireland reporting improvements. Yorkshire & the Humber, London and East Midlands recorded the largest declines in confidence.

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Paul Gordon, managing director for SME and mid corporates at Lloyds Bank Commercial Banking, said: “While the recent developments have seen some heavy impact across the regions, it is reassuring to see that some have recorded improvements and are navigating the headwinds of recovery with resilience.

“Although it is difficult to predict the road ahead, we will remain by the side of businesses as they face into these unprecedented times.”

He added that the services sector may see a boost in the coming months as the festive season approaches.

Meanwhile, Hann-Ju Ho, senior economist at Lloyds, said the “ongoing uncertainties regarding new trading arrangements with the EU in January” also added to the fall in confidence.

“All of this makes the economic outlook uncertain and the period ahead will be pivotal for businesses as they navigate the winter months and continue to adapt to the evolving landscape,” he said.

Overall business confidence was calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy. Companies were surveyed between 1 October and 15 October.

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