Business confidence in London fell 20 points during April to 40%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported lower confidence in their own business prospects month-on-month, down six points at 50%. When taken alongside their optimism in the economy, down 35 points to 31%, this gives a headline confidence reading of 40%.
Despite the drop in confidence, London businesses flagged a range of growth opportunities for the next six months, including diversifying into new markets (42%), investing in their teams (40%) and introducing new technology (26%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 31% of businesses in the region expect to increase staff levels over the next year, down 32 points on last month.
Overall, UK business confidence remained unchanged during April, at 33%. Firms’ outlook on their future trading prospects rose five points to 39%, but their optimism in the economy dipped slightly on March’s reading (down from 32% to 26%). The net balance of businesses planning to create new jobs also decreased by six points to 26%.
Every UK region and nation reported positive confidence readings in April. Wales (up 25 points to 20%), the South East (up 19 points to 30%) and the West Midlands (up 10 points to 42%) reported the largest increases month-on-month, with the West Midlands now the most optimistic region overall.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Despite a significant drop in April, business confidence in London continues to be amongst the highest of any region in the UK.
“Looking ahead, we’re fast approaching the first summer without any restrictions since the start of the pandemic, and the city’s world-famous hospitality sector in particular will be ready to capitalise on the uptick in tourism.
“As pressure continues from rising costs and the impact of war in Ukraine, we’ll be by the side of London firms across all sectors to help them navigate these challenges and continue to push for growth.”
From a sector perspective, manufacturing confidence increased by eight points to 43%, erasing part of the 19-point decline in March, helped by somewhat stronger trading prospects.
Retail and services confidence, however, were little changed on the month and is weaker than at the start of the year, with businesses increasingly concerned about the outlook for the wider economy. Retail confidence edged up one point to 29%, while services confidence was unchanged at 32%. Construction confidence fell for a second month to 33%, but is still on a par with the all-sector average.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “April’s data is mixed and follows the significant decline in business confidence in March after Russia’s invasion of Ukraine. Although firms reported a partial recovery in their trading prospects, optimism for the wider economy declined for a second successive month.
“Positives remain as overall confidence is above the long-term average, but it is still expected that growth will moderate over the coming months and many businesses will remain cautious as they face into these headwinds.”