Business confidence in London fell four points during May to 43% but remains the highest out of the UK’s regions and nations, 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 five points at 49%. When taken alongside their optimism in the economy, down five points to 36%, this gives a headline confidence reading of 43%.
London businesses identified their top target areas for growth in the next six months as investing in their team (37%), evolving their offer (37%) and introducing new technology, such as AI (31%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 34% of businesses in the region expect to increase staff levels over the next year, down five points on last month.
Overall UK business confidence dropped five points to 28% in May. Despite the dip, every UK nation and region report a positive confidence reading.
As the country celebrated the Coronation, the North East had the second-highest levels of business confidence at 35% (down six points month-on-month). The West Midlands, South East and South West, also reported high readings in May, all at 30%.
Firms remain optimistic about their own trading prospects, with a net balance of 34% expecting business activity to increase over the next 12 months, down just five points on last month.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Although the Business Barometer registered a slight dip in confidence, the results are overwhelmingly positive as the country’s capital gears up for the busy summer months. This is especially true for those in retail and hospitality, that will be preparing for the welcome influx of tourists.
“For some businesses part of these preparations will include taking on new staff to support the increased demand, and so it’s no surprise to see that investing in training is a top priority for many of London’s firms. Freeing up cashflow will be essential to make these investments, and we’ll be by firms’ side to ensure they have the working capital they need to successfully seize on the rising demand.”
Confidence among manufacturers increased to a one-year high of 40% (up from 29%), while retail registered a more modest two point rise to 26%, and construction remained robust at 34% despite its monthly nine point decline. Services confidence, however, fell back to 26% from 36%, almost erasing last month’s rise. Overall, confidence across the broad sectors remains above levels at the start of the year.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.
“However, while firms’ trading prospects and economic optimism both eased back, they still remain in positive territory as the UK has avoided an outright contraction in GDP – indicating a certain amount of underlying resilience in the economy.”
