Lloyds Bank’s Business Barometer for December 2018 shows
Overall business confidence fell by 7 points to 17%, the lowest level since June 2016, driven by weaker trading prospects and economic optimism.
Economic confidence fell by 10 points to 7% to its lowest level since November 2017, while trading confidence eased by 4 points to 27%, the lowest since May 2017
Confidence fell in almost all parts of the country; the lowest net confidence levels were in Scotland (-9%) followed by the South West (+8%); sentiment was the strongest in London (+32%) and the West Midlands (+27%)
Confidence dropped across all business sectors with firms in the retail sector at 21%, down 9 points, and the services sector falling by 7 points to 13%.
Overall business confidence – an average of business prospects and economic optimism – fell by 7 points to 17% ending the year on a low, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
In the context 0f 2018, December’s figure of 17% is lower than the average of the whole year at 28%. The last time overall confidence was lower was in June 2016, when the survey was conducted post the EU referendum result.
The main driver of the fall in confidence is companies view in the outlook for the economy, with the net balance falling by 10 points to 7%, the lowest level this year. The detail shows that 37% of companies said their economic optimism had improved and 30% said that it had fallen, leading to a 10 point fall in the net balance to 7%.
The proportion of companies expecting their trading prospects to improve in the coming year (41%) still far outweighs the proportion that is anticipating a decrease (14%). However, the net balance in this measure (+27%) was down 4 points compared with last month.
Business response to Brexit Concerns about Brexit remain at the highest level this year, with the net balance of businesses stating that Brexit was having an impact on their business prospects is now at minus 11%, down 5 points. This is the most negative this year.
Brexit concerns appeared to be highest among firms in services sector saw the net balance of (-18%) and retail (-10%), followed by manufacturing (-5%). Firms in the construction sector were slightly positive (+4%) about Brexit.
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking commented: “Tentative signs of a recovery in business confidence last month proved to be short-lived, as businesses end the year more concerned about their trading prospects and the wider economy. The expected slowdown in economic growth in Q4 could well be extended into early 2019, but there is potential for a rebound in sentiment should there be some respite in uncertainties that firms currently face.”
Regional and sector variationsConfidence fell in almost all parts of the country with the lowest net confidence levels in Scotland (down 20 points to minus 9%), followed by the South West (13 point decrease to 8%), the South East (down 4 points to 9%) and the East of England (down 6 points to 11%).
Firms in London were the most confident at net 32% (down 2 points), followed by the West Midlands at 27% despite a 12 point fall and Northern Ireland at 22% (up 6 points).
Overall business confidence fell across all industry sectors. Businesses in the manufacturing and construction sectors were most confident in their prospects at net 23% (down 9 points) and 22% (down 7 points), respectively.
Confidence of retail businesses was 9 points lower at net 21%, while confidence was lowest in the services sector at 13% (down 7 points).
The net balance of businesses intending to increase their staffing levels in the next twelve months fell 4 points to 17%. Overall, 45% of companies expect to maintain their current staffing levels, however, the proportion anticipating an increase in employment fell 3 points to 36%, while 19% expect to have to reduce their staff levels over the course of next year.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking said:
"Despite some marginal regional variations, the national picture shows that business confidence is subdued. However, firms remain broadly resilient about their own business prospects, which should hopefully help them prepare for the challenges that lie ahead in 2019.”