Business confidence has dropped to a four year low

Economic uncertainty and weaker UK demand are the biggest threats to growth over the next six months, Lloyds Bank reports

Confidence among the UK’s business owners has hit a four year low amidst concerns over economic uncertainty and UK demand, the latest Business in Britain report from Lloyds Bank has suggested.

Surveying over 1,500 companies across July 2016 – predominantly small to medium-sized businesses – the annual report found that confidence with regards to expected sales, orders and profits over the next six months has dropped to 12%; a 26% decline on the survey’s score in January 2016.

Optimism among businesses in the service sector has suffered markedly with an average decline of 30 points while the survey indicated a great disparity in business confidence on a regional level. Confidence levels were found to be below the national average in the south of England and Scotland but above average in Wales, the Midlands, and the North of England.

Lloyds has suggested that this disparity may have been driven by the reaction to the Brexit result; with confidence levels the lowest in London and Scotland where the majority vote was for ‘Remain’.

The Group’s managing director of mid-markets and SME banking, Tim Hinton, has commented:“Business confidence has taken a hit since our last report in January, but this should be viewed in the context of the recent economic and political shocks.

“The EU referendum vote has introduced a level of uncertainty for companies as the UK decides on the best model for its future relationship with the EU, and this is likely to continue for the foreseeable future. Whilst sentiment has fallen to a four-year low, it remains well above the lows reached during the global financial crisis of 2008/2009.”

Hann-Ju Ho, senior economist of Lloyds Bank commercial banking, added:

“Economic growth is likely to slow in the next six months, following a relatively robust performance in the first half of the year. […] Even though inflation is expected to pick up as a result of the weaker pound, this may be offset by the survey findings of a fall in capacity pressures within firms and a fall in recruitment difficulties.”

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