Monday, April 15, 2024

East Midlands businesses begin 2024 with growth in confidence

Business confidence in the East Midlands rose four points during January to 38%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.

While firms in the region reported lower confidence in their own trading prospects month-on-month, down 12 points to 39% in January, their optimism in the wider economy climbed 20 points to 37%. Taken together, this gives a headline confidence reading of 38%.

East Midlands businesses identified their top target areas for growth in the next six months as evolving their products and services (42%), investing in their team (39%), and introducing new technology (27%).

A net balance of 26% of businesses in the region also expect to increase staff levels over the next year, down 14 points on last month.

The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

National picture

Overall, UK business confidence rose nine points in January to 44% – its highest level since February 2022 and its strongest start to a year since 2016. Firms’ outlook on the overall UK economy rose ten points from 27% to 37%, while businesses’ optimism in their own trading prospects also climbed three points month-on-month to 51%.

Companies’ hiring intentions increased marginally, with 33% of firms intending to increase staff levels over the next 12 months, up four points on the month before.

London and the North East were the joint most confident parts of the UK in January – each posting a headline confidence of 62% – followed by the West Midlands (56%) and Yorkshire & the Humber (44%).

The East of England (38% in January vs. 45% December) and Northern Ireland (29% vs. 36%) were the only two regions to reporting declining levels of confidence. The majority of the data was collected before the December ONS inflation data was announced on January 17th.

Sector insights

Three of the four sectors tracked in the Barometer reported rises in confidence. The most significant increase was in services which accelerated 15 points to 45%, up from December’s 16 point drop. Manufacturing confidence also increased to 49%, while construction rose eight points to a 10-month high of 45%.

There was a more mixed picture in retail however, dipping three points to 41% with anecdotal evidence of weaker footfall and sales in December as shoppers hit the streets earlier than usual in November. Nevertheless, some companies still reported stronger sales over the festive period.

Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking, said: “It’s encouraging to see East Midlands business start the year on a confident footing after a challenging 12 months for businesses in the region and across the UK.

“While hiring intentions have dipped, more than third of businesses are planning to invest in their teams over the next six months. By putting short-term plans in place like this, they are setting themselves up for long-term success as economic conditions improve.

“We know we’re not out of the woods in terms of wider geopolitical challenges, but by playing close attending to areas like working capital, firms can bolster their resilience against future headwinds. We’ll continue to be by the side of firms as we help them move forward in the strongest position possible.”

Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, said: “Businesses are feeling more confident following the cautious end to 2023, with this being the strongest start to a year since January 2016. The reduction in inflation, albeit with the recent uptick, and the belief that interest rates may have peaked is likely driving the rise in confidence among firms.

“With ongoing geopolitical issues and a general election on the horizon, businesses will have factored these into their risk radars and will be working to prepare for any potential impacts on their trading prospects.

“Also, half of all companies say they’re planning to increase headcount in the coming year. Despite that and the changes to minimum wage that will come into force in April, expectations for staff pay fell back following last month’s increase.”

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