29 March 2019

The latest Lloyds Bank Business Barometer shows:

  • Overall business confidence1 increased by six points in March to 10%, but remains below the long-term average of 24%2.
  • Firms in ten of the twelve UK regions saw confidence bounce, with the biggest increase in Yorkshire and The Humber (21 points up at 21%). Businesses in Scotland and the East of England saw decreases, both falling eight points to -3% and -2% respectively.
  • Retail sector confidence reached a four-month high at 22%, while services continued to lag behind despite increasing 11 points to 7%.
  • While 20% of firms have delayed debt refinancing due to uncertainty, 62% said they would continue operating as usual in a ‘no deal’ scenario when asked between 1 and 15 March.

UK business confidence – an average of business prospects and economic optimism – edged back up from February’s low at the start of this month, rising six points to 10% overall. Both trading prospects and economic optimism contributed to March’s rise: the net balance of firms reporting stronger trading prospects was up seven points to 20%, while economic optimism rose five points to 0%.

Despite rebounding following February’s 15 point fall to 4%, which was the lowest level since mid-2016, confidence remained below the historical average of 24% (chart 2). Against the long-term trends, March’s overall business confidence is comparable to levels seen after the June 2016 EU referendum and the European sovereign debt crisis at the start of the decade.

 Employment expectations for the coming year improved for the first time in three months. The net balance rose by three points to 13%, with one-third (33%) of firms expecting to increase their staff numbers and one-fifth (20%) anticipating that they may need to reduce their staff levels.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking said:

“The strengthening of confidence in the first half of this month provides some solace in light of recent pessimism, and there has been a slight improvement in firms’ expectations about the impact of the UK’s departure from the EU. However, levels remain below the long-term average and continue to show volatility as political negotiations continue.”

Regional overview: Ten regions up, two regions down

March’s rise in national confidence was mirrored in ten of the twelve UK regions. The largest rises were in Yorkshire and the Humber (up 21 points to 21%) and the East Midlands (up 15 points to 18%).

London (up 12 points to 17%) and the West Midlands (up six points to 17%) were joint third strongest, with the North West (unchanged at 12%) ranking fifth. The North East (up two points to 10%) and Wales (up 12 points to 10%) were joint sixth, while the South East and South West each fell six points to 6% and 7% respectively, well below the national average.

At the other end of the scale, the East of England and Scotland both recorded eight point falls in confidence, to 2% and 3% respectively, while Northern Ireland confidence remained low (1%) despite a nine-point boost.

Retail drives growth, with service sector close behind

The overall confidence of businesses in the retail sector rose by eight points to reach a four-month high of 22%. Services made an 11 point improvement to 7%, but continued to lag behind other sectors. However, the overall confidence of manufacturing and construction firms fell for a second month, to 10% and 13% respectively, suggesting the outlook in both sectors has dimmed since the start of the year.

Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking said:

 “The partial recovery of business confidence shows that optimism is by no means stable, and continues to fluctuate from month to month. However, it is encouraging to see that the bounce was mirrored in ten of the twelve regions, and that the majority of firms are feeling confident in their ability to withstand pressures arising from the UK’s departure from the EU.”

Impact of EU-UK negotiations

Overall, 21% of firms (unchanged from February) said that leaving the EU will have a positive impact on their business activity, while 38% (down from 39% last month) thought it would have a negative impact. The resulting net balance was -17%, near February’s low of -18%.

Additional questions around business preparedness for the UK’s departure from the EU revealed that when it comes to their own business models, a majority of firms believe they are suitably prepared. 63% believe they will continue operating as usual if there is no deal, while 62% think their working capital arrangements will allow them to withstand any additional pressures from leaving the EU.

However, UK-EU negotiations clearly continue to affect business investment decisions. 20% said they are holding back from refinancing debt due to uncertainty, while 28% believe they will look to invest once more certainty is provided.


Notes to editors:

1 Overall business confidence is a measure of responses from surveyed companies, which is calculated as an average based on their views on business prospects and optimism on the UK economy.

2 The long-term average for business confidence is calculated as the average since the survey began in 2002, taking into account the expansion of the survey’s sample size at the start of 2018 when firms with turnover below £1m were included for the first time.

  • The Business Barometer results provide early signals about UK economic trends. The survey started in January 2002 and research is carried out monthly on behalf of Lloyds Bank by BDRC Continental.
  • This survey was conducted with 1,200 companies between 1st and the 15th March 2019 from all sectors and regions of the UK. Prior to January 2018, the fieldwork was based on 200-300 companies.
  • The results are reweighted to match proportions by size, sector and region of the total business population, as published by the Department for Business, Energy and Industrial Strategy and the Office for National Statistics.