More than a quarter (28%) of London businesses expect to increase staff levels over the next year, higher than any other UK region or nation, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported lower confidence month-on-month, down by four points during July to 37%, but remains among the highest in the UK. Businesses had less confidence in their own prospects compared to June, down seven points at 29%. When taken alongside their optimism in the economy, up one point to 45%, this gives a headline confidence reading of 37%.
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
Overall UK business confidence dipped three points to 30% in July but remains well above the year-to-date average of 19%. Businesses in the North East (40%), East Midlands (38%) and North West (38%) were the most optimistic overall.
In July, four regions reported an increase in confidence: the North East (up 13 points to 40%), North West (up nine points to 38%), East Midlands (up seven points to 38%) and West Midlands (up one point to 30%), while the remainder reported a drop.
Scotland (down 14 points to 28%), East of England (down 11 points to 25%) and Wales (down nine points to 12%) reported the biggest falls in confidence but all retained an overall positive reading.
The overall number of UK firms expecting planning to create new jobs in the next twelve months rose one point to 18% in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen.
Mark Amis, regional director for London at Lloyds Bank Commercial Banking, said: “Companies in London are more likely than anywhere else in the UK to create new jobs, and this is a huge boost to a city that is looking to bounce back after a turbulent 18 months. The slight drop in London business confidence during July is a reminder that, despite lockdown restrictions being fully lifted, firms are still wary of the rise in Covid cases and resulting uncertainty.
“Whatever lies ahead, we will remain by the side of businesses across the capital to help them navigate the next phase of recovery.”
Confidence fell slightly in the broad economic sectors in line with the overall economic picture. Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33% (down from 35%) for manufacturing and 32% (down from 36%) for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33% (from 35%) and 28% (from 31%), respectively.
In the subsectors, confidence was particularly strong in hospitality (63%, up from 38%), and transport (53%, up from 37%), reflecting the further opening of the economy, as well as in business services & finance. Employment and pay growth expectations were also especially strong in these subsectors as well as in construction.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “A sixth consecutive monthly increase in employment expectations alongside an increase in pay growth predictions continues to highlight the resilience of UK businesses despite a slight dip in overall business confidence. With COVID-19 restrictions having now been significantly eased in parts of the UK we can have further confidence in firms’ outlook for the UK economy.”