Business confidence in the East Midlands dropped 12 points during March to 22%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the region reported lower confidence in their own business prospects month-on-month, down 17 points at 30%. When taken alongside their optimism in the economy, down nine points to 14%, this gives a headline confidence reading of 22%.
Despite the fall in confidence, businesses reported plans to target new growth opportunities in the next six months, including evolving products and services offers (43%), utilising new technology to improve operations (29%) and investing in training and development for staff (24%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 13% of businesses in the region expect to increase staff levels over the next year, down seven points on last month.
Overall UK business confidence dropped 11 points during March, from 44% to 33%. Firms’ outlook on their future trading prospects (down from 45% to 34%) and optimism in the economy (down from 43% to 32%) both fell by 11 points on February’s reading. The net balance of businesses planning to create new jobs decreased by six points to 32%.
Every UK region and nation reported positive confidence readings in March, with the exception of Wales which saw confidence drop from 29% to -5%. Only London (up 13 points to 60%), Yorkshire and the Humber (up six points to 57%) and the North West (up one point to 45%) reported a higher reading than last month, with London now the most optimistic region overall.
Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “East Midlands businesses haven’t been immune to the ongoing challenges arising from surging prices and the war in Ukraine, both of which sadly show no signs of resolution in the near future. All companies across the region will now be looking to steady the ship ready to deal with the challenges ahead.
“We’ll work with local businesses to make sure they can look to the future with more optimism and give them the support they need to tap into these growth opportunities.”
From a sector perspective the impact of the war in Ukraine appears to have had the greatest impact on manufacturing and retail firms. Both sectors saw drops in confidence of 19% from February’s highs (to 35% and 28% respectively). From a manufacturing perspective confidence levels are now at their lowest since last summer, while retail has fallen to a one-year low.
In the other sectors, services dropped by six points (32%) while construction dropped eight points to 43%, but remained higher than at the start of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “March’s data shows UK businesses are facing significant challenges from the impact of Russia’s invasion of Ukraine in increasing economic uncertainty and ongoing inflationary pressures. Following encouraging improvements at the start of the year, March’s fall in confidence is therefore disappointing, but not surprising.
“There are positives with the fact that confidence remains above the long-term average and it appears for now that growth will moderate. But it is difficult to gauge what the full impact will be and therefore businesses have become more cautious.”
