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London business confidence falls in February

by Thea Coates Finance Reporter
29th Feb 24 10:13 am

Business confidence in London fell 24 points during February to 38%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

Companies in London reported lower confidence in their own business prospects month-on-month, down 12 points at 51%. When taken alongside their optimism in the economy, down 37 points to 24%, this gives a headline confidence reading of 38% (vs. 62% in January).

London businesses identified their top target areas for growth in the next six months as entering new markets (43%), introducing new technology (38%) and evolving their offering, including introducing new products or services (37%).

A net balance of 40% of businesses in the capital expected to increase staff levels over the next year, down seven points on last month.

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

National picture

Overall, UK business confidence dipped two points in February to 42%, driven by softening confidence from firms in both their own trading prospects (49% vs. 51% in January) and the wider economy (34% vs. 37% in January).

However, companies’ hiring intentions increased to the highest level since May 2022, with 36% of firms intending to increase staff levels over the next 12 months, up three points on the month before.

Scotland was the most confident part of the UK in February (56% vs. 42% in January), followed by the North East (54% vs. 62%) and the East Midlands (52% vs. 38%).

Sector Insights

There was a mixed picture for sectors this month. Confidence fell in manufacturing (nine points to 40%) and construction (seven points to 38%) respectively, although results remain higher than the same time last year. In contrast, the dominant services sector was unchanged compared to January at 45%, exceeding all months of 2023 except for November. Retail confidence was broadly steady, dipping one point to 41%.

Paul Evans, regional director for London at Lloyds Bank Commercial Banking, said, “Despite this month’s fall in confidence, London businesses remain resilient and optimistic when it comes to their own prospects – a sign of the capital’s strength and adaptability amid what are still challenging economic conditions.

“As this data shows, businesses are pursuing new opportunities in the form of new markets, and we’ll continue to be by their side on these journeys to help them convert their ambition into growth.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said, “This month’s data still reflects a positive mood among businesses despite a marginal fall in overall confidence. Firms appear to be upbeat about their prospects and the economy, supporting their positive staffing expectations.

“Looking at the sectors, there is a mixed picture. There was a slight fall in confidence reported in the manufacturing and construction sectors, while retail and services stood their ground – remaining unchanged compared to January’s figures. But despite the manufacturing and construction fall, businesses are still showing high levels of confidence.

“The split across the regions also provides reason to view the dip in confidence at the broader UK level cautiously. Six regions have reported an increase in confidence while the other six have reported a decrease. So, scratching the surface, we see a story that continues to show a more positive outlook for the year ahead.”

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