Business confidence in London rose five points during January to 3%, the first time it’s been a positive reading since the Covid-19 outbreak began, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in the capital reported higher confidence in their own business prospects month-on-month, up 11 points at 9%. When taken alongside their views of the economy, down one point to -2%, this gives a headline confidence reading of 3%.
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
Almost two-thirds (62%) of firms said current Covid-19 restrictions had caused a fall in turnover but they expected the effects of the vaccine programme to boost trading prospects for 2021, with 53% saying the rollout had made them feel more confident about the year ahead. However, only 20% expect trading levels to return to pre-pandemic levels in the next twelve months.
When it comes to jobs, a net balance of 2% of businesses in the region expect to reduce staff levels over the next year, a month-on-month decrease of seven points.
Nationally, overall business confidence dipped in January as the third lockdown came into force, falling by three points to -7%. Firms’ economic optimism dropped dramatically month-on-month, decreasing by 34 points to -10%.
Almost all UK nations and regions saw a month-on-month dip in confidence during January, with the biggest falls reported in Scotland (-32% vs -9% in December), Wales (-20% vs -1% in December) and the South West (-8% vs 5% in December). However, firms reported a month-on-month increase in confidence in the South East (up seven percentage points to -4%) and North West (up eight percentage points to -5%), as well as London (up five points to 3%). Yorkshire business confidence remained steady month-on-month at -4%.
Mark Amis, regional director for London at Lloyds Bank Commercial Banking, said: “Despite the significant operating challenges presented by the current lockdown, especially for London’s world-famous tourism and hospitality sectors, it’s encouraging to see confidence move tick into positive territory in January. Some London sectors, such as financial services, have been able to continue operating despite the restrictions and this may have helped boost the city’s outlook.
“Firms also report that the vaccine roll-out is fuelling their confidence and helping them feel positive about the coming months. We remain by the side of firms businesses across the capital to help them emerge from the pandemic in as strong a position as possible.”
In the industry sectors confidence remained above pre-vaccine levels (chart 4). While some sectors reported declines, manufacturing slipped by nine points to 9%, services fell by four points to -9% and retail by five points to 6%. Confidence levels in the construction sector improved for a second month, rising four points to -1%.
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “It has been a challenging start to the New Year for UK businesses adapting to a third national lockdown alongside the new EU trade arrangement taking effect. Nevertheless, while confidence remains below average, it is encouraging that business sentiment is still the second highest since the low of May 2020. Overall, the vaccine rollout programme has lifted confidence and that will hopefully buoy business optimism in the coming months.”
