Overall business confidence rose by 6 points to 23 per cent in September, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Economic optimism increased by 7 points to 12 per cent, the second lowest level this year. The share of companies who were more optimistic about the economy increased by 1 point to 34 per cent, while those who were pessimistic fell by 6 points to 22 per cent.
Firms’ confidence in their own business prospects increased by 4 points to 33 per cent. This was driven by a 1 point increase to 44 per cent in those expecting higher business activity in the next year and a three point drop to 11 per cent of those expecting lower activity.
Confidence in both business prospects and economic optimism remain below their respective long-term averages.
Companies’ hiring intentions remain positive despite the net balance of firms expecting to increase headcount over the next year falling by 1 point to 26 per cent. Thirty-three percent (unchanged from last month) indicated that they expect to increase staff levels while 7 per cent (up from 6 per cent) anticipated a reduction. The result is only slightly lower than the average (30 per cent) over the past year, during which time the unemployment rate has fallen to a four-decade low of 4.3 per cent (in July).
Business confidence increased most in the North in September, by 16 points to 19 per cent. However, sentiment was highest in the South where it increased by 7 points to 30 per cent. Businesses in the Midlands reported decreased confidence, falling by 8 points to 16 per cent.
Confidence in consumer services rose strongly by 30 points to 33 per cent, outperforming both the industrial sector (up 10 points to 20 per cent) and the business & other services sector (down 11 points to 18 per cent).
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, commented:
“The September report shows that overall sentiment increased, but it remained below the long-term average of 32 per cent. The increases in both business prospects and economic optimism signal that the economy continued to expand in Q3 but at a slower pace than last year.”