Business confidence in London rose eight points during May to -20%, making the capital the least pessimistic region in the UK alongside the North East, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the city reported greater confidence in their own business prospects at -11%. When taken alongside their views of the economy, this gives a headline confidence reading of -20%.
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
In an illustration of the impact COVID-19 is having on the capital’s businesses, the majority of firms continued to see demand negatively affected during May, but with the picture improving on the month prior. Although 56% reported a fall in demand for their products and services during May, this was down 22 points on the month before. 20% experienced an increase in demand, up eight points on April.
One in ten (11%) businesses weren’t operating at all, an increase of two points on April. However, in a sign that some businesses were moving back towards pre-coronavirus trading levels, the number of firms in the region operating at less than 50% capacity decreased 15 points to 37%.
Of the 70% of businesses reporting disruption to their supply chain during May, 24% expected the situation to improve within three months, while 7% expected it would take more than 12 months to return to normal levels.
Paul Evans, regional director for London at Lloyds Bank Commercial Banking, said, “While it will clearly be some time before we return to something resembling normality, we must take encouragement from London firms increasing their operational capacity.
“As the disruption continues, we will remain by the side of businesses across the capital to help them navigate the current environment and plan for the future. Our team is working hard to support businesses large and small, so they can emerge from this in as strong a position as possible.”
Across the UK, business confidence held steady month-on-month, dipping just one point to -33%. Along with London, the North East saw confidence rise month-on-month, scoring the joint-highest confidence reading at -20%. The South West recorded the lowest confidence during May at -51%, compared to -35% the month prior.
From a regional perspective, despite all being in negative sentiment, six of the 12 regions reported a higher confidence in May. The North East was the least negative region at -20%. The South West was the most negative region at -51% followed by the South East at -45%.
In May, the construction sector saw the sharpest decline, falling 24 percentage points to -44%. However, all the three other major sectors saw a modest increase. The retail sector increased eight points to -25%, while manufacturing rose to -27% and services saw a small increase of four points to -18%.
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said, “Despite the results partly capturing the period since the Government’s announcement of an initial easing of restrictions, trading conditions remain difficult for most firms. Nevertheless, a further relaxation of constraints will enable more businesses to resume their activities.”