01 August 2019

The latest Lloyds Bank Business Barometer shows:

  • Overall business confidence was steady in July at 13%, in line with the average this year, but below the long‑term average of 24%.

  • Trading prospects for the year ahead fell by 3 points to 19%, but economic optimism rose 1 point to 6%

  • Employment expectations rose by 1 point to 12%, but signal a slowdown in hiring from last year

  • Manufacturing confidence rose 9 points to 19%, but construction dropped 11 points to 6%; retail also fell 5 points to 17%, while services was unchanged at 12%

  • Big rises propel the South West and the East Midlands, while firms in the North West and Scotland were the least confident 

Overall business confidence remained unchanged in July at 13%, and was significantly above the dip to 4% in February, according to the latest findings from Lloyds Bank Commercial Banking Business Barometer. Overall business confidence is calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy.

However, business confidence was lower than 2018 levels (average of 28%) and still remains below the long‑term average of 24%. Firms indicated that expectations for trading prospects in the year ahead eased back a little, with the net balance falling 3 points to 19%.

However, optimism regarding the wider economy increased for a second consecutive month, rising 1 point to 6%, standing now at the highest level since January (10%). That balance comes against a backdrop of ongoing economic uncertainty, very likely related to global trade tensions and lack of clarity on EU negotiations.

Employment expectations increased incrementally by 1 point to 12%, but the net balance remains below the 2018 average of 25%. Approximately one-third of firms now expect to increase their staff levels in the coming year, compared with over 40% of firms in last year’s survey.

The impact of Brexit on expected activity remained negative, but the net balance rose 2 points to ‑17%. That was the second consecutive increase, albeit from the low of ‑21% in May. Twenty percent (unchanged from last month) of companies said that Brexit is expected to have a positive impact, while 37% (down from 39%) said that it would have a negative impact.

“The most adverse impact was expected in the manufacturing sector, with the net balance rising to ‑26% from ‑14%. That was followed by services where the net balance rose to ‑19% from ‑24%. The equivalent figures for construction and retail were ‑15% and ‑8%, respectively.


Despite rising concerns among manufacturing firms about the UK’s departure from the EU, this was the only sector that reported an increase in overall business confidence, rising 9 points to 19%. The improvement in confidence may reflect the truce in the US-China trade war following the G20 summit in Japan last month, raising hopes of an eventual agreement. Services confidence was unchanged at 12%, but retail confidence fell 5 points to 17%. Construction confidence declined 11 points to only 6%, the lowest since our survey was expanded in 2018.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “It is promising to see confidence levels continuing to beat the dip seen in February despite business confidence remaining below the long-term average and overall business confidence remaining unchanged this month.

“Coupled with this, employment expectations still remain largely unchanged from last month, with only one-third of firms planning to increase their staff levels, compared with over 40% of firms last year, suggesting cautious business behaviour in the current economic environment.”


There were some big changes in the regional breakdown of overall confidence this month, with two of the previously strongest performing regions, the North West and London, losing their position in the top four.  

Firms in the South West and East Midlands were the most confident, following big jumps this month to 29% (up 21 points) and 26% (up 18 points), respectively. The West Midlands (down 6 points to 19%) and Northern Ireland (up 11 points to 18%) were also in the top four.

In contrast, confidence fell significantly in the North West (down 17 points to 3%) and Scotland (down 17 points to 0%), which are now the least confident parts of the country. Yorkshire & the Humber (up 1 point to 6%) and the South East (down 10 points to 4%) were also in the bottom four. The middle four positions are taken up by Wales (up 4 points to 16%), London (down 3 points to 15%), the East of England (down 4 points to 9%) and the North East (down 7 points to 7%).

Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “The manufacturing sector may have been boosted by the truce in the trade war between China and the USA, which hopefully marks an upturn for this sector and could paint a more optimistic outlook for coming months but broader political uncertainty is expected to weigh on the outlook.

“The fact that business confidence has been boosted in the South West and East Midlands with confidence up 21 points and 18 points respectively could be a sign of an upturn, but we will need to wait and see what the coming months bring. It is certainly a continued indication of the UK’s business resilience.”