Business confidence in London fell one point during July to 32%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported higher confidence in their own business prospects month-on-month, up 15 points at 46%. When taken alongside their optimism in the economy, down 18 points to 19%, this gives a headline confidence reading of 32%.
London’s businesses identified their top target areas for growth in the next six months as investing in their team (38%), introducing new technology (37%) and evolving their offer (36%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 11% of businesses in the region expect to increase staff levels over the next year, down 23 points on last month.
Overall, UK business confidence dipped by six points to 31% in July, with nine out of 11 regions and nations reporting a lower confidence reading month-on-month.
Optimism in the economy has also fallen, dropping to a five-month low, as many companies identified rising interest rates as one of their biggest concerns.
Despite the fall in overall confidence, levels remain higher than the survey’s long-term average reading of 28% and every UK region and nation reported a positive confidence reading in July. The North East reported the highest levels of business confidence at 43% (down four points on last month), followed by Yorkshire (down seven points month-on-month) and the West Midlands (up two points month-on-month) both at 38%.
Firms also remained resilient in their own trading prospects, with 43% of companies expecting business activity to increase over the next 12 months, up one point on last month and reaching a 14-month high.
Retail was the only broad sector registering higher confidence (up six points to 35%), mostly reflecting stronger transport services.
The fall in overall business confidence this month was led by the service sector sentiment falling by seven points to 30%. While the fall in confidence was seen broadly across this sector, hospitality firms appeared to be more resilient.
Confidence also was lower in manufacturing (down 16 points to 34%) and construction (down eight points to 31%).
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said, “Set against a tricky economic backdrop, the resilience of London’s businesses is impressive, and maintaining high levels of confidence over the first half of this year bodes well for firms’ long-term growth ambitions.
“The surge in optimism in their own business prospects is likely down to the start of the summer holidays when London’s retailers and leisure providers gear up for an influx in demand from tourists. This, coupled with an easing in inflation, is setting firms on a more optimistic path.
“But it’s crucial that firms keep an eye on the long-term, ensuring that they have the cash flow and sufficient working capital to build on the momentum they’ve gained. We’ll continue to be by their side to deliver the financial solutions that will keep growth a priority.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking added, “The Barometer presents a complex picture for firms this month, with the data showing that trading prospects remain strong with businesses feeling under less pressure by inflation to raise prices. However, there is clearly uncertainty about the wider economy and rising interest rates.
“This may be causing net hiring intentions to moderate slightly. Nevertheless, wages and jobs growth continue to support staff with the current cost of living.
“However, the sectoral analysis this month shows some positive signs for the retail sector, while there are indications that pent-up demand may be boosting confidence in tourism and travel. As businesses continue to adapt to the economic environment, we expect to see ongoing resilience broadly across all sectors.”