Business confidence in the UK fell to 36% in September, “a five point dip from the 18-month high (41%) recorded in August, as companies saw a decline in both economic optimism and trading prospects for the year ahead.” This, according to an update shared by the Lloyds Banking Group.
While confidence has fallen it remains higher than the first three months of 2023 (20%). Firms’ trading prospects were “down this month with 52% (down five points) of businesses anticipating stronger activity in the next 12 months, compared with 11% (unchanged) expecting weaker outcomes.” This resulted in “the net balance falling five points to 41% versus 46% in August.”
Optimism about the wider economy “also reduced, with 51% (down four points) of firms reporting greater optimism, while 21% (up two points) were less upbeat.”
The net balance therefore “fell six points to 30%, although this is still the third highest level during 2023.”
Overall, confidence levels in the United Kingdom “remain well above the 22-year average of the Barometer of 28%, reflecting an upward trend in confidence during 2023, as monthly rises have generally been larger than any subsequent fall in following months.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said:
“While the gains in business confidence we saw in August have not been maintained, it’s important to see the wider trend clearly reflected in the data which paints a very different picture to this time 12 months ago, when the economy was in significant difficulties. Despite some month-to-month movements, if you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and now an average of 27% in the third.”
As noted in the update:
“Although the economic environment remains uncertain with inflation and interest rate pressures playing their part, the recent decision by the Bank of England to leave interest rates unchanged is likely to help businesses feel more upbeat about the future, which may underpin confidence in the last three months of the year.”
Pricing expectations increased marginally in September, “with a one-point increase to 57%.”
The Barometer shows that firms are “prioritizing maintaining or increasing their profit margins, which is likely to be as a response to inflation.”
The number of firms planning “to cut prices fell to 3% (down two points), although firms which plan to raise prices was also down by the one point (60% from 61%), offsetting some of the change.”
For more details on this update, check here.
