Business confidence in the East Midlands fell 22 points during July to 30%, 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 14 points at 37%. When taken alongside their optimism in the economy, down 27 points to 25%, this gives a headline confidence reading of 30%.
East Midlands businesses identified their top target areas for growth in the next six months as evolving their offer (38%), investing in their team (35%) and diversifying into new markets (34%). The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. A net balance of 15% of businesses in the region expect to increase staff levels over the next year, down 24 points on last month.
Overall, UK business confidence dipped by six points to 31% in July, with nine out of 11 regions and nations reporting a lower confidence reading month-on-month.
Optimism in the economy has also fallen, dropping 11 points to 21%, the lowest levels since February this year.
However, firms remained resilient in their own trading prospects, with 43% of companies expecting business activity to increase over the next 12 months, up one point on last month and reaching a 14-month high.
Despite the fall in overall confidence, levels remain higher than the survey’s long-term average reading of 28% and every UK region and nation reported a positive confidence reading in July. The North East reported the highest levels of business confidence at 43% (down four points on last month), followed by Yorkshire (down seven points month-on-month) and the West Midlands (up two points month-on-month) both at 38%.
Retail was the only broad sector registering higher confidence (up six points to 35%), mostly reflecting stronger transport services.
The fall in overall business confidence this month was led by the service sector sentiment falling by seven points to 30%. While the fall in confidence was seen broadly across this sector, hospitality firms appeared to be more resilient.
Confidence also was lower in manufacturing (down 16 points to 34%) and construction (down eight points to 31%).
Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “Despite the dip in overall business confidence, firms in the East Midlands have a high level of optimism in their own business prospects, something that will help buoy them as they focus on their plans for the year ahead.
“I know from speaking to businesses across the region that many see opportunities in growing and developing their team, but inflation is affecting their ability to invest in developing skills. Financial tools such as invoice discounting and term loans can help businesses to manage their cash flow, enabling them to free up capital to invest in the training or making the new hires they need to grow their business.”
Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “The Barometer presents a complex picture for firms this month, with the data showing that trading prospects remain strong with businesses feeling under less pressure by inflation to raise prices.
“However, there is clearly uncertainty about the wider economy and rising interest rates. This may be causing net hiring intentions to moderate slightly. Nevertheless, wages and jobs growth continue to support staff with the current cost of living.
“However, the sectoral analysis this month shows some positive signs for the retail sector, while there are indications that pent-up demand may be boosting confidence in tourism and travel. As businesses continue to adapt to the economic environment, we expect to see ongoing resilience broadly across all sectors.”
