Business confidence in London rose 20 points during August to 52% – the highest reading of all UK regions and nations – 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 10 points at 56%. When taken alongside their optimism in the economy, up 27 points to 46%, this gives a headline confidence reading of 52%, the highest level in London since May 2022.
London businesses identified their top target areas for growth in the next six months as investing in their team (40%), evolving their offer (38%) and investing in sustainability (32%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 36% of businesses in the region expect to increase staff levels over the next year, up 25 points on last month.
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Overall UK business confidence increased to its highest level since February last year, jumping 10 points to 41% in August. All 11 regions and nations reported a positive business confidence reading in August, with nine regions and nations reporting a higher confidence reading month-on-month.
Optimism in the UK economy also increased in August by 16 points to 37%, and the number of businesses expecting an increase in their trading prospects rose by three points to 46%.
After London, firms in the South East reported the second highest reading at 47% (up 17 points month-on-month), followed by those in the South West at 46% (up 12 points month on month).
The construction, retail and service sectors all saw a rise in business confidence in August. Services gained 12 points to reach a 22-month high of 42%, while retail firms were up nine points to 44%, an 18-month high. Construction firms’ confidence also increased by 11 points to a four-month high of 42%. In contrast, manufacturing confidence fell for a second consecutive month with a 4-point decline to 30%, taking it to the lowest level since April 2023.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “London has secured the top spot for business confidence more consistently than any other region or nation in the UK this year, so the capital’s firms must be doing something right. Turning this confidence into economic success will hinge on planning investments in strategic areas, managing working capital and accessing financial solutions and advice. We’ll continue to be by the side of businesses to help them do just that.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “The bounce in economic optimism this month is the standout point. Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact. With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.
“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”
