Business confidence in London fell eight points during September to 44%, but remained the highest level of all UK regions and nations for a second month in a row – according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported lower confidence in their own business prospects month-on-month, down seven points at 49%. When taken alongside their optimism in the economy, also down seven points to 39%, this gives a headline confidence reading of 44%.
London businesses identified their top target areas for growth in the next six months as investing in their team (40%), introducing new technology (35%) and breaking into new markets (33%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 33% of businesses in the region expect to increase staff levels over the next year, down three points on last month.
Overall UK business confidence fell five points in September from 41% to 36%. Firms’ outlook on their own trading prospects remained strong at 41% despite a five-point drop on last month, and their optimism in the UK economy also remained robust at 30%, down by seven points on August’s reading.
Businesses hiring intentions remained upbeat with 26% of firms reporting plans to increase their staff levels over the next year, down five points on last month.
After London reporting the highest levels of confidence, firms in Yorkshire reported the second highest reading at 40% (up eight points month-on-month), followed by those in the North West at 38% (up four points month on month).
The fall in business confidence this month centred around the retail and services sectors, following strong sentiment in August. Retail confidence fell to 32% (down 12 points) dragged down in particular by trading prospects, while services confidence declined to 36% (down eight points). Construction confidence also fell to 36% (down eight points). However, manufacturing was stronger, with confidence rising to a three month high of 36% (up six points).
Paul Evans, regional director for London at Lloyds Bank Commercial Banking, said, “London remaining the most optimistic in the UK for the second month running is welcome news. It tees the city up nicely for a positive run into the Christmas period, which represents a boon time for a lot of London businesses.
“I know that firms aren’t going to rest on their laurels and are going to prioritise further growth in the months ahead. The recent surprise fall in inflation is likely to boost confidence further and bolster growth plans, and we’ll be by businesses’ side to make those happen.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said, “While the gains in business confidence we saw in August have not been maintained, it’s important to see the wider trend clearly reflected in the data which paints a very different picture to this time 12 months ago, when the economy was in significant difficulties.
“Despite some month-to-month movements, if you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and now an average of 27% in the third.
“Although the economic environment remains uncertain with inflation and interest rate pressures playing their part, the recent decision by the Bank of England to leave interest rates unchanged is likely to help businesses feel more upbeat about the future, which may underpin confidence in the last three months of the year.”