Confidence slips, but business still positive
Confidence amongst British businesses slipped back last month, according to the latest Lloyds TSB Corporate Markets Business Barometer.
The survey – a monthly snapshot of company views on the outlook for the economy – shows that optimism amongst UK businesses fell from the 27 month high reached in March. It shows that just under half of UK businesses (49 per cent) expect business activity to rise over the coming year, while less than one in ten (seven per cent) believe trading will slow. The resulting balance of +42 represents a slight fall from the high of +49 reached in the previous survey.
Despite this slight dip in confidence, business optimism remains above the Barometer’s long term average – an indication that medium term growth prospects are still positive.
There are also signs that companies now have brighter hopes for the wider economy. The total balance of firms saying they are more optimistic than they were three months ago rose four points to 47 per cent. Two thirds (64 per cent) of businesses say they are more optimistic, while a fifth (17 per cent) are less so.
Once again, there were differences across the sectors. Industrial firms were on the whole more upbeat about prospects for the coming year – a balance of 47 per cent said they expected business activity to increase in the next 12 months, which is a two-point rise on last month. By comparison services and distribution firms are less hopeful. The balances for businesses in these sectors fell 14 points and eight points respectively.
The regional picture is also varied. Businesses in the North and South both reported a decline in expectations for business activity over the coming year (down four points and 16 points respectively), while in the Midlands the confidence balance edged up three points to 37 per cent. However, when asked about their views on the wider economy, Midlands firms reported they were less hopeful than three months ago – the balance slipped seven points to 36 per cent. Companies in the other regions, on the other hand, were more optimistic – balances rose 10 per cent in the North and eight per cent in the South.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “Although business confidence appears to have come off the boil this month, we need to be careful about interpreting the results.
“Expectations for improvements in business activity may have slipped, but they are still comfortably in line with the long term average – and that’s a good indication that long term growth prospects remain positive.
“We’re also seeing some signs that businesses are more hopeful about the general economy. The Barometer’s measure of business confidence compared to the previous three months is a reliable leading indicator of shorter term economic activity and it too is on the rise.”
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