Business confidence in London fell sharply in September as renewed Middle East tensions and higher energy costs weighed on companies’ assessment of the wider economy, although firms remained relatively positive about their own trading prospects.
The latest Lloyds Business Barometer showed headline confidence in the capital falling 15 points to 46 per cent, down from 61 per cent in August and below the region’s 12-month average of 57 per cent.
The deterioration was driven almost entirely by a collapse in economic optimism. London businesses’ assessment of the broader economic outlook fell 32 points to 31 per cent, while confidence in their own trading prospects was unchanged at 60 per cent.
The divergence suggests companies remain more confident about their ability to navigate the next year than about the economic environment in which they are operating.
London businesses continued to anticipate expansion, with a net balance of 34 per cent expecting to increase staff numbers over the next 12 months. That was nevertheless nine points lower than in August.
The capital’s confidence is now well below its annual peak of 68 per cent recorded in January, reflecting a broader deterioration in sentiment across the UK.
Kirsty Sadler, regional director for London at Lloyds, said the figures nevertheless showed resilience among companies.
“Despite a fall in overall confidence levels, it’s encouraging that London is still outperforming the UK average,” she said.
“And maintaining healthy confidence in trading outlook, despite broader economic challenges, suggests businesses in the city are focused on what they can control.”
Companies are also planning for growth despite the weaker macroeconomic backdrop. Half of London firms identified entering new markets as a key priority over the next six months, followed by investment in staff training at 47 per cent and developing new products and services at 43 per cent.
Nationally, business confidence fell 12 points to 41 per cent, its lowest level since April 2025.
The decline followed August’s 53 per cent reading and was attributed to weaker economic optimism as businesses responded to higher energy costs linked to renewed tensions in the Middle East.
Companies’ own trading outlook fell eight points to 50 per cent, although this remained above the survey’s long-term average.
Some 57 per cent of businesses nationally expected output to increase over the coming year, down nine points from August, while only 7 per cent anticipated weaker activity.
For companies expecting a deterioration, the main concerns were economic uncertainty, rising costs and weaker customer demand.
Amanda Murphy, chief executive of Lloyds Business and Commercial Banking, said smaller companies were facing particular pressure.
“While confidence among larger firms remains strong, smaller businesses have seen a fall in sentiment as they continue to navigate higher costs, inflationary pressures and global uncertainty,” she said.
“Overall confidence remains above its long-term average, and most businesses still expect activity to grow over the coming year, underlining the resilience of UK firms.”
The figures underline the increasingly fragile balance facing the UK economy, businesses continue to plan for expansion, but confidence in the economic backdrop is deteriorating as energy prices and geopolitical uncertainty feed through into corporate expectations.
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