UK business confidence has fallen for the second consecutive month in November but new research shows that news of a coronavirus vaccine has boosted in sentiment.
According to the latest Lloyds Bank Business Barometer, overall business confidence fell by three percentage points to -21%, the lowest levels seen since July.
But, responses in the second week of the survey saw confidence increase by three percentage points, suggesting confidence improved following announcements of COVID-19 vaccines progression.
Respondents were more positive on 9 November and showed confidence increasing by seven points to -15%, after the announcement of the vaccines progress.
While confidence remains above the lowest levels recorded since the start of the crisis in March, it continues to sit below the long-term average of 28%.
November’s decline was mainly driven by weaker optimism about the wider UK economy, with the net balance falling by five points to a five-month low of -28%.
Overall business confidence is calculated by averaging the views of 1,200 companies on their business prospects and optimism about the UK economy
Research findings were conducted between 2 November and 16 November, during which a second England lockdown was reintroduced and high-level restrictions were also in place in other parts of the UK.
The recent lockdown measures continue to impact sentiment, with firms’ assessment of their own business prospects falling marginally by one point to -14%.
Additionally, businesses’ evaluation of their hiring intentions also dropped by two percentage points to -20%, with 38% anticipating a lower headcount.
A pay freeze is also planned by 33% of firms, which is significantly higher than the start of the year when only 14% were planning freezes.
Lloyds Bank commercial banking senior economist, Hann-Ju Ho said: “The sustained number of coronavirus cases and more restrictive lockdown measures saw overall business confidence fall again this month. Firms across the sectors also continue to remain cautious as they prepare for a new trading relationship with the EU.
“However, confidence increased following the news of a potential vaccine to help combat the virus. The months ahead will be key for businesses as they navigate the winter months and adapt to the evolving landscape.”
Sector wise, confidence declined in manufacturing, construction and retail as stricter lockdown restrictions were imposed across the UK.
Manufacturing confidence fell by 10 points to -25%. This was driven by a sharp decline in optimism regarding Britain’s economy and a smaller decline in trading prospects.
Construction confidence dropped by 13 points to -23%, while retail confidence fell by five points to -12%.
Meanwhile, services confidence — the UK economy’s biggest sector — increased slightly by three points to -21%, having already fallen significantly in October.
Regionally, despite recording a higher than UK average over the past three months, the North West recorded the sharpest decline in confidence, down 26 points to -28%.
This was closely followed by Northern Ireland and the East of England falling by 14 points to -25% and eight points to -21% respectively. Scottish business confidence fell for a second successive month to -38%.
Sentiment improved in Yorkshire & Humber, up 18 percentage points to -11%. The highest levels of confidence was recorded in the North East at -8%.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “Regional confidence remains unsteady as each region grapples with the new lockdown or increased level of restrictions in their area.
Gordon said that the tightening of measures had a “negative impact on the services sector” last month, especially the “leisure and arts that bore the brunt of preventive measures” to help contain COVID-19.
“However, as we approach the festive season, and with restrictions set to ease once England-wide lockdown ends, we have seen an increase in confidence. We hope this continues in the months ahead as it brings a much-needed boost for the sector and wider industries,” he said.
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