UK business confidence remained steady in September after falling for the previous three months, new data has shown.
According to the Lloyds Bank (LLOY.L) business barometer, confidence came in at 16% during the month, still lingering at its joint lowest level since March 2021.
While business confidence remained below the long-term average of 28%, it was still above the lowest levels seen in 2020 during the first COVID wave, at -33% in May of that year.
The firms were surveyed between 1 and 15 September. Lloyds said: “Since companies were surveyed before the UK government’s Fiscal Statement on 23 September the effect of the announcement on business confidence will be seen in next month’s data.”
Some 55% of respondents expect to raise their prices in the coming year amid the sharpest cost of living crisis in a century, while just 9% of businesses are looking to increase salaries by 5% in the next 12 months.
In addition, almost a third (29%) of businesses anticipate a 3% wage growth in the next year — a new high up from 26% in August, and nearly triple the 10% level in 2019 seen prior to the pandemic.
Staffing expectations for the year ahead were stable this month, with a one-point rise to 39% for companies anticipating an expansion of their workforce. However, this was countered by 23% — up one point — expecting to reduce their headcount as they tackle rising costs such as energy, and a weaker pound (GBPUSD=X).
The data also revealed that economic optimism fell two points to a 19-month low of 5% during September.
Businesses’ trading prospects remained broadly unchanged at 26%, with a one-point rise in businesses expressing prospects of stronger activity, which was offset by the same one-point rise in companies reporting a weaker outlook.
Watch: How does inflation affect interest rates?
“It is encouraging to see business confidence stabilising after a three-month decline. Firms’ assessment of their own trading prospects also remained steady and continues to show some resilience during turbulent times,” Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said.
“With the recent volatility in financial markets as well as the government’s growth plan and energy cap announcements, it will be interesting to see how these measures affect business confidence.”
On a regional level, business confidence was strongest and remained above the UK average in London (33%), the North East (30%) and the West Midlands (19%).
The survey revealed some short term volatility in some parts of the country, including rises in the South East (15%) and Scotland (15%) from previous weak levels while, in contrast, in the North West (14%) and Yorkshire & the Humber (11%) confidence decreased.
Business confidence also rose by two points in both the retail and service sectors at 15% and 17% respectively, however both these figures are close to 12-month lows.
Manufacturing and construction firms saw their lowest levels of business confidence this year, down two points in manufacturing to 14% and down 16 points to 10% in construction. This was driven by overall falling optimism in the economy.
Paul Gordon, managing director for SME and mid corporates at Lloyds, said: “Keeping a watchful eye on out-goings, especially energy bills as we head into the winter months, will ensure businesses are in the best possible position and right now businesses will be taking on board what the currency position means for their business models.
“While capital and cash flow management are undoubtedly vital during this time, we would encourage businesses to reach out to their networks for support if they find themselves struggling. At Lloyds we remain by the side of businesses to help deliver the support firms needs to navigate these challenging times.”