UK business confidence dipped to a three-month low in September, the Lloyds Bank Business Barometer has found.
The survey, which ran from 2nd – 16th September, revealed that overall UK business confidence fell three points to 47%, its lowest for three months, but remained higher than the long-term average of 29%.
The update from Lloyds Bank also noted that the decline followed a period of sustained positivity from businesses. In July and August 2024, confidence had reportedly reached 50% – the highest level reported since November 2015.
The dip in September comes along with a drop in overall UK economic optimism.
Although 57% of businesses felt confident regarding the economy, 19% were less positive, resulting in a drop in the total balance (of 9 points), falling to its lowest level since March this year (38%) – even though it still remains well above long-term trends.
In contrast to the fall in economic optimism, companies’ own trading prospects increased two points to 56%, matching this year’s high to signal steady business activity in the next twelve months. 63% (up from 62%) anticipated stronger output, while 7% (down from 8%) forecast weaker returns.
The Barometer survey data further revealed that many companies still have positive hiring intentions, even though slightly impacted from previous months. 53% of respondents said they planned to increase their hiring / professional staffing levels within the next year – a stat which is unchanged from this past month.
But a one percentage point increase (16% to 17%) in the proportion of businesses that said they expected to reduce their workforce led to the overall net balance going down to 36%.
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking said that even though overall confidence fell this month, that fall was actually attributed to a 9-year high and businesses remain positive regarding their trading prospects.
The joint-highest result this year could suggest that respondents still see a positive future for their own businesses, which is reflected in the “largely unchanged” employment figures.
As noted in the update from Lloyds Bank, significant number of firms also expressed their intentions to raise prices in the next year.
An 11-point rise brought this figure to 65%, which was mainly driven by small business-owners seeking to maintain current profit margins.
The Barometer examines just how many businesses might raise prices, rather than by how much. This indicates that businesses might increase prices in the coming year, rather than the scale of the increase and is not indicative of longer-term pricing.
Projections for output were mixed across the sectors, with some showing significant changes from previous results.
In construction, the sharp increase last month was largely counteracted by a drop in expectations in September, falling by 12 points to 46%.
Similarly, in manufacturing, trading prospects fell for a second month to 53%, although this figure is still stronger than the year-on-year figure.
However, the falls in manufacturing & construction sectors were more than offset by a small rise in retail and a bigger rise in the dominant service sector.
Paul Gordon, Managing Director for Relationship Management, Lloyds Bank Business & Commercial said that these results show that businesses are dealing with a complex period, but it’s vital to acknowledge that the underlying numbers remain fairly steady.
