East Midlands business confidence drops 10 points to lowest in the UK

business confidence
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Businesses in the East Midlands are now the least confident in the UK, according to the latest Business in Britain report from Lloyds Bank.

Confidence – calculated as an average of respondents’ expected sales, orders and profits over the next six months – fell 10 points to 14 per cent since January.

The net balance of firms looking to grow investment in the next six months has also fallen by 10 points since January to a net balance of zero per cent – meaning as many firms plan to reduce investment as plan to increase it.

And net balance of just one per cent of businesses now expect to hire more staff, a fall of nine points since the start of the year. The share of firms that reported difficulties hiring skilled labour rose two points to 49 per cent. Meanwhile, the net balance of businesses expecting to increase pay fell by 15 points to five per cent.

The Business in Britain report, now in its 26th year, gathers the views of more than 1,500 UK companies, predominantly small to medium-sized businesses, and tracks a range of performance and confidence measures, weighing up the percentage of firms that are positive in outlook against those that are negative.

Glen Wilson, regional director for East Midlands at Lloyds Bank Commercial Banking, said: “It’s disappointing to see that confidence in the East Midlands has dropped and is now among the lowest in the UK, particularly after the high levels of confidence seen at the beginning of this year.

“There is no doubt that local businesses are facing some stiff challenges at the moment, with Brexit uncertainty and concerns over domestic demand highest among them. In light of this, it’s unsurprising that businesses have become more cautious, reducing their investment and recruitment plans accordingly.

“While there is a degree to which this may be prudent amid such uncertainty, businesses need to ensure they are not missing out on the opportunities being created amid the current turbulence.”

Confidence Index      
Region Jul 2018 Jan 2018 Change (Jan – July)
London 31 per cent 25 per cent +6pts
South East 30 per cent 24 per cent +6pts
South West 29 per cent 19 per cent +10pts
West Midlands 29 per cent 28 per cent +1pts
North East 25 per cent 38 per cent -13pts
East of England 25 per cent 18 per cent +7pts
Wales 23 per cent 20 per cent +3pts
Yorkshire & Humber 23 per cent 15 per cent +8pts
Scotland 20 per cent 17 per cent +3pts
North West 19 per cent 31 per cent -12pts
East Midlands 14 per cent 24 per cent -10pts

Economic uncertainty remains one of the greatest risks to firms in the East Midlands in the next six months, despite decreasing by eight points to 15 per cent. Extra regulation was also cited as the greatest threat by 15 per cent of firms in the region, up from eight per cent in January.

The proportion of East Midlands firms reporting uncertainty around Brexit as their greatest risk was 13 per cent, while those citing weaker UK demand was 11 per cent.

More than 35 per cent of firms in the East Midlands expect a negative impact on their business if no trade agreement is reached with the EU. Less than a fifth (18 per cent) expect a positive impact, while 47 per cent either do not expect any impact or said they didn’t know.