Business confidence in London rose 23 points during May to 63%, the highest reading of any UK region or nation, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported higher confidence in their own business prospects month-on-month, up 18 points at 68%. When taken alongside their optimism in the economy, up 27 points to 58%, this gives a headline confidence reading of 63%.
London businesses reported plans to target growth opportunities in the next six months, including entering into new markets (55%), investing in their teams (49%) and evolving their offering (33%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 68% of businesses in the region expect to increase staff levels over the next year, up 37 points on last month, the highest level of any UK nation or region.
Overall UK business confidence increased by five points during May to 38% – its highest level since February. Firms’ outlook on their future trading prospects rose three points to 42%, and their optimism in the economy increased seven points to 33%. The net balance of businesses planning to create new jobs also increased by 11 points to 37%.
Every UK region and nation reported positive confidence readings in May. After London, Scotland (up 14 points to 42%) and the North West (up 12 points to 44%) reported the largest increases month-on-month. The East of England, which experienced a 20-point dip in confidence in the last month, is now the least optimistic overall, at 14%.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said, “It’s hugely encouraging to see confidence among London businesses hit a six-month high, especially against the backdrop of ongoing challenges such as rising costs and skills shortages.
“Continuing this upbeat outlook and putting growth plans in place will rely on businesses managing their operations carefully. Keeping a close eye on cashflow and closely managing working capital will be key.”
“At Lloyds Bank, we’ll remain by the side of companies across the capital with tailored support and products to help them achieve their ambitions.”
From a sector perspective, retail confidence fell two points to 27%, remaining lower than the all-sector average of 38% in the last three months. The confidence level is also the lowest since March 2021 as pressure on household real incomes weigh on spending prospects. In contrast, there was a 21-point rise in construction to 54%, while manufacturing sentiment remained resilient, up two points to 45%. Confidence in the services sector reached a three-month high, increasing 4 points to 36%.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said, “Business confidence improved this month and firms in general seem able to rebuild some of their margins through price increases. However, they also report several challenges ahead, including concerns around higher costs and an economic slowdown. More immediately, consumer-facing industries, such as retail, are not feeling the same confidence uplift amid the widespread reports of a squeeze on household incomes.”
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